| Fund Company | Fidelity Investments Canada |
| Fund Type | Canadian Focused Equity |
| Rating | B |
| Style | Large Cap Value |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Daniel Dupont since March 2011 |
| MER | 2.27% – Front End Units, 2.47% – DSC Units |
| Code | FID 231 – Front End Units FID 531 – DSC Units |
| Minimum Investment | $500 |
Analysis: Managed by Daniel Dupont since March 2011, this Canadian focused equity fund has been one of our favourites. It is managed using a bottom up, fundamentally driven, value focused stock selection process. Mr. Dupont is looking to buy strong, well managed companies that have unrealized growth potential that are trading at a significant discount. An ideal investment candidate has a sustainable business model and is expected to deliver high return on capital. The upside potential is carefully considered with the downside risk.
The concentrated portfolio is focused on Canada, but can invest up to 49% of the fund abroad. As of December 31, it held approximately 40 names with the top ten making up 44% of the fund. While the portfolio is built on a stock by stock basis, there are some risk controls in place. For example, the maximum weight that any one stock can have in the fund is capped at 7%, but each position is determined by the manager’s conviction in the company. The higher the conviction in a name the higher the weight in the fund.
The portfolio looks considerably different to the index. For example, it has no exposure to materials and is underweight financials and energy, while holding an overweight position in technology and consumer discretionary. Even within the financial sector, the manager is focusing on insurance companies rather than banks, believing that insurers will outperform when rates begin to rise. There is also considerable risk to banks should we see a marked slowdown in the housing market.
This positioning will result in performance that does not track the benchmark closely. In 2012 the fund gained 6.0% compared with a 7.2% rise in the S&P/TSX Composite Index. Further, this positioning will likely result in an underperformance of the index, should it go on a tear.
Volatility, particularly to the downside, is lower than the index, providing better downside protection in periods of higher volatility.
This remains one of our top picks in the Canadian equity category. Its costs are reasonable, the expected risk reward profile is favourable, and it looks much different than the index. This is exactly the type of fund you want when you are considering an actively managed fund.