CIBC Monthly Income Fund

Analysis: On January 18, 2013, it was announced that long serving manager David Graham was stepping down from his portfolio manager duties because of illness. He was replaced by Colum McKinley who has been with the firm since May 2010 and has been managing money since 1999. Craig Jerusalim, who has worked closely with David Graham since 2007, remains on the fund.

The basic theme and process of the fund’s management are expected to remain intact, but there will be some changes in the execution. These changes would include a reduction in the number of names held to increase the concentration in the portfolio. Historically, it had held approximately 60 names, but this will be lowered to approximately 45. Also, given Mr. McKinley’s experience running the CIBC Canadian Equity Value Fund, we would expect that the equity sleeve will look quite similar to that. In that fund, the manager focuses on dividend paying equities trading at a discount to intrinsic value.

Performance in that fund has been respectable, gaining 5.4% for the year ending January 31, outpacing the S&P/TSX Composite Index and the majority of its peer group. Over a three year period the fund slightly lagged the benchmark, but did finish in the upper half of the category.

The fixed income sleeve will continue to be managed by the same management team as before. Under the current environment, they have a bias towards corporate bonds.

The target asset mix will be 45%-55% equity, 25%-45% fixed income, 0%-5% preferreds, with a maximum cash weighting set at 5%.

Despite the unfortunate circumstance that required this portfolio manager change, we don’t believe that investors will be negatively impacted by it. The basic process will remain intact, the equity sleeve will likely become a touch more conservatively managed with greater emphasis on valuation and yield and we expect it to become a little less volatile.

Considering the above, we would not suggest any immediate action as a result of this manager change.