| Fund Company | Mawer Investment Management Ltd. |
| Fund Type | Canadian Small / Mid Cap Equity |
| Rating | A |
| Style | Growth at a Reasonable Price |
| Risk Level | Medium High |
| Load Status | No Load |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Martin Ferguson since December 1996 Jeff Mo since July 2012 |
| MER | 1.47% |
| Code | MAW 107 – No Load Units |
| Minimum Investment | $5,000 |
Analysis: This has been one of the best small cap funds in the country, but unfortunately it has been closed to new investors for years. Given that BMO has just closed the BMO Guardian Enterprise Fund, which is simply this fund in a different wrapper, we don’t see this fund opening anytime soon.
In selecting stocks, the manager follows a “Growth at a Reasonable Price” approach. They focus on small cap stocks that have a demonstrated history of generating high returns on equity, but are trading at a level that is below their estimate of its true worth.
For each investment candidate, they conduct detailed fundamental analysis, reviewing the company’s business model, financials and business strategy. They are looking for companies that have a competitive advantage that will allow them to generate strong free cash flow and returns in excess of their cost of capital. To determine their estimate of a company’s true value, they use a discounted cash flow model.
To help manage concentration risk, individual positions are capped at a maximum of 6% of the fund, while individual sectors capped at 20%. The portfolio holds just under 60 names with the top ten making up 46% of the fund. Financials and real estate make up 27%, followed by industrials and energy. Portfolio turnover is low.
Performance has been stellar, handily outpacing the BMO Canadian Small Cap Index and its peer group. For the five years ending January 31, the fund gained nearly 10% on an annualized basis, while the index was up only 1.7%. Another great quality of this fund is that it has demonstrated strong outperformance in down markets. In 2008 when index was down nearly 50%, it was down 38%. In 2011 when index was down 16%, it was up just over 1%.
The only real drawback to this fund, at least for those who don’t own it is that it is capped. They want to keep asset levels under control so they can continue to effectively manage the fund for current investors. While it is disappointing for those who would like to own it but don’t, it is the right thing to do. If you hold it, keep it. If you don’t own it, keep your fingers crossed that they may reopen it one day.