| Fund Company | Invesco Canada Ltd. |
| Fund Type | Canadian Focused Equity |
| Rating | B |
| Style | Mid Cap Blend |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Clayton Zacharias since August 2007 Mark Uptigrove since August 2007 |
| MER | 2.21% |
| Code | AIM 1553 – Front End Units AIM 1551 – DSC Units |
| Minimum Investment | $500 |
Analysis: According to the fund profile listed on Invesco’s website, this fund is a “core Canadian equity fund” that invests in “a concentrated portfolio of high quality, blue chip companies.” When I think of blue chip companies, I think of the banks, Suncor, Enbridge, and BCE – basically the biggest, most stable companies in the country. Yet when I look at the holdings of this fund, I see names like Newalta, International Rectifier and Grafton Group. I’m sure they are all good companies, just not what I would consider to be blue chip.
But just because I don’t buy the marketing spin doesn’t mean this isn’t a decent fund. It is a very solid offering that invests in companies of all sizes. Like other Trimark branded funds, it is a concentrated portfolio of high quality, industry leading, businesses run by capable management teams that are trading at a valuation that is less than its true worth.
The portfolio is built on a stock by stock basis and they pay no attention to the benchmark. As a result, it looks nothing like it, with a 21% weighting in industrials, 20% in energy and 19% in financials. It has minimal exposure to materials.
It is Canadian in focus, but can invest up to 49% outside of Canada. Currently, it has 19% invested in the U.S., 10% in Ireland and 3% in Austria. The manager’s take a long term view, resulting in very modest levels of portfolio turnover.
Since taking a beating in 2007 and 2008, performance has roared back, beating not only the index but most of its peer group. Between March 2009 and March 2013, the fund gained an annualized 22% per year, handily outpacing both large and small cap benchmarks.
Not surprisingly, with the concentrated portfolio and mid cap focus, it is more volatile than more broadly focused Canadian equity funds. As a result, portfolio exposure should be based on one’s risk tolerance.
Looking ahead, the managers believe that there are still fundamental issues around the amount of debt outstanding, and until that is dealt with, they expect that volatility will remain high. More than 17% of the fund sits in cash. While this is largely a result of the managers’ investment process, it will help to buffer against any downside moves in the markets. However, it will also act as a drag should markets rise sharply higher.
Costs are reasonable, with an MER of 2.22%, which is in the lower half of the peer group.
We like this fund, but do not believe it is suitable as a core holding for anyone, except maybe those with a very high tolerance for risk. Instead, we see it as a return enhancer as part of a well diversified portfolio.