| Fund Company | Invesco Canada Ltd. |
| Fund Type | Canadian Focused Small / Mid Cap Equity |
| Rating | B |
| Style | Blend |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Rob Mikalachki since December 2000 Jason Whiting since April 2011 Virginia Au since November 2005 |
| MER | 2.68% |
| Code | AIM 1683 – Front End Units AIM 1681 – DSC Units |
| Minimum Investment | $500 |
Analysis: Like most other funds that carry the Trimark banner, this fund invests in a concentrated portfolio of high quality businesses run by great management teams that they can acquire at a reasonable valuation. The managers look for industry leading businesses that have sustainable competitive advantages. There also must be what the managers call a “big idea” with a company. This big idea is something that they believe the market hasn’t yet recognized that will help unlock the value of the company.
To find these companies, the managers conduct detailed fundamental analysis looking for companies with good growth potential and low downside risk. Ideally, they like to buy these names after it has experienced a big drop in price.
The end result is a concentrated portfolio of about 40 names with the top 10 making up slightly less than half of the fund. It is Canada focused, meaning it can invest up to 49% outside of Canada. Currently about 65% is invested in Canada, 26% in the U.S. and a few scattered holdings in Europe.
Because the fund is constructed on a bottom up basis, there are no set sector weight targets. Currently, it is heavily weighted in technology, followed by industrials and financials. The managers aren’t afraid to go off the beaten path to find interesting investment ideas. Looking at the top ten, there aren’t a lot of names that will be familiar to most people. Portfolio turnover has been relatively modest, but has increased slightly since the 2011 departure of former manager Ted Chisholm.
Returns over both the short and long term have been strong with a five year annualized return of 8.1%, handily outpacing the index and the category average. Shorter term numbers are also impressive, with a one year gain of 5.7%, outpacing the index by more than 500 basis points. Volatility is lower than other small cap funds, but not surprisingly is higher than a large cap fund.
There are a number of compelling reasons to like this fund including a good management team, and a disciplined investment process. Given the recent announcement that the BMO Guardian Enterprise Fund was being capped, this is definitely a small cap fund to consider.