Aston Hill Growth & Income Fund

Analysis: The Aston Hill Growth & Income Fund is listed as an alternative strategies fund, but is actually a traditional mutual fund. In reality, it’s more a global neutral balanced fund that can engage in a bit of shorting and derivatives, which gives it that alternative strategies flavour.

It invests in a mix of stocks and bonds with the goal of providing a fixed distribution without any capital grind. It pays a monthly distribution of $0.03 per unit, which works out to an annualized yield of around 5.5% at current prices. Current asset mix is about 40% bonds, 50% equities, 15% cash and about 3% in shorts. It has a go anywhere mandate, but will primarily invest in Canada and the U.S.

The equity focus is on the small and mid cap growth space while the fixed income sleeve appears to focus on high yield.

Long term performance has been pretty decent. It looks like it got pummeled after its launch in 2008, but since the market bottom in February 09 it had delivered strong returns with modest volatility. The current management team took over in 2010. They are very active with portfolio turnover levels well in excess of 200%, which adds an additional 50 to 60 basis points of cost to the fund, on top of the MER, which is a touch high for the category, coming in at 2.49% in 2011, which is down from well above 3% in 2010 and 2009.

Looking at the asset mix, with its mid cap and high yield focus, we expect that it will be more volatile than others in the category. As long as we don’t hit much in the way of turbulence, we expect this will do okay and will likely be in the upper half of its category. But, at the first whiff of trouble, we expect it will sell off in a big way as people head towards the stability of large cap dividend payers and government bonds.

This is not a fund that is for everybody and should only be considered by those with an above average appetite for risk.