Dynamic Global Discovery Fund

Analysis: The Dynamic Global Discovery is a neat little fund that looks to build a concentrated portfolio of high quality companies located anywhere in the world. What makes this unique is that they are looking for companies that are off the beaten track and unlikely to be held in other global equity funds, which should help make it a better diversifier in a portfolio.

In managing the fund, David Fingold uses a strict, value driven, bottom up research process that is focused on identifying companies that have low price to earnings and price to cash flow ratios, and have an attractive dividend policy. In addition, the manager must be able to identify a catalyst that will help to drive the share prices higher.

It is opportunistically managed, meaning that portfolio turnover is expected to be very high. For the past five years, turnover has averaged more than 125% per year. They will also look for companies that are undergoing a restructuring, are not covered by sell side analysts or are located in emerging markets. Ideally these companies will have hidden assets, unrecognized growth potential and the ability to pay or increase dividend. Currency exposure is actively hedged.

While we really like the concept of this fund, we have been largely unimpressed with its execution of late. Performance has been middle of the pack in the global equity category. Despite a poor showing in 2008 when it lost slightly more than the benchmark, the fund has exhibited decent downside protection overall. Unfortunately, the upside participation has not been stellar.

Overall volatility has been comparable to both the index and the category average. True to its mandate, it has shown relatively low correlation to the S&P 500 and the MSCI EAFE. Cost is a touch on the high side with an MER of 2.76%.

Considering the above, it is our opinion that there are better global equity fund options available to investors.