| Fund Company | RBC Global Asset Management Inc. |
| Fund Type | Canadian Focused Equity |
| Rating | D |
| Style | Quantitative Blend |
| Risk Level | Medium |
| Load Status | No Load / Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | James O’Shaughnessy since November 1997 |
| MER | 1.54% |
| Code | RBF 550 – No Load Units RBF 775 – Front End Units |
| Minimum Investment | $500 |
Analysis: Like the other O’Shaughnessy Funds, the RBC O’Shaughnessy Canadian Equity Fund uses a quantitatively driven stock selection process that is highlighted in the manager’s book “What works on Wall Street”. Essentially the manager employs various screens looking for stocks that have a history of above average sales, above average trading value and above average cash flow. The manager will then pick the highest ranked 50 stocks for inclusion in the portfolio on an equally weighted basis. The screens are run several times a year, with the end portfolio being made up of between 150 and 200 stocks with significant levels of portfolio turnover. The Fund will be fully invested at all times.
The focus of the fund is in Canada however the manager does have the ability to invest in U.S. and international equities. Any foreign exposure will be hedged back to Canadian dollar terms, which will help boost returns in periods of rising currency and hurt returns in a declining currency relative to funds which do not hedge their currency exposure.
In other regions, the model tends to be early in making stock calls. This has the potential to result in above average volatility, although to date, volatility is in line with the index. Given the experience with other O’Shaughnessy managed funds, we believe that this fund may also experience higher levels of volatility than other Canadian focused equity funds.
Recent fund performance has improved dramatically. The one year return as of January 31 was 14.5%, nearly three times the index gain of 5%. This has in turn boosted the longer term numbers, which have largely trailed in the index, but still managed to end in the upper half of the category. The five year return is 1.4% compared to 2.3% for the index. Most of this excess performance can be attributed to the fund’s U.S. exposure.
Despite the recent turnaround in performance, we would be reluctant to recommend this as a core holding for most investors. It is our view that investors would be better off with an actively managed fund over this offering.