| Fund Company | Franklin Templeton Investments Corp. |
| Fund Type | Global Equity |
| Rating | D |
| Style | Blend |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Christian Correa since May 2009 Mandana Hormozi since May 2009 |
| MER | 2.72% |
| Code | TML 213 – Front End Units TML 313 – DSC Units |
| Minimum Investment | $500 |
Analysis: Like other funds managed by the Mutual Series, this U.S. focused offering is managed using a disciplined, three pronged approach. The core of the portfolio is invested in undervalued stocks that the managers believe have a viable, near term catalyst in place that will help to unlock shareholder value. In selecting names for the portfolio, they must be trading at a level that is a significant discount to their estimate of its true value. These types of opportunities will typically make up around 90% of the fund.
With the balance of the portfolio they will invest in distressed securities and merger arbitrage opportunities. Distressed securities are those that are undergoing some sort of turmoil, such as emerging from bankruptcy protection, spinoffs, or management changes. Merger arbitrage involves trying to generate profits by trading the different securities of companies that are involved in a merger or other acquisition. Because these strategies carry higher risks, their exposure within the portfolio is fairly limited. At the end of May, 8% was invested in distressed opportunities and just under 2% was invested in a merger arbitrage play.
The portfolio is very well diversified, holding more than 100 names with the top ten making up about a quarter of the fund. While the focus is on the U.S., it can invest up to 30% abroad.
One surprising aspect of this fund is just how volatile it has been, particularly compared to its counterpart the Mutual Global Discovery Fund. Managed in a nearly identical manner, the Mutual Beacon has shown a level of volatility that is significantly higher. Much of that has to do with the fund’s performance in 2008, when it sank by more than 45%. The management team at the helm has since been replaced and shorter term performance has been impressive, outpacing the majority of the U.S. equity category for the past three years.
I am generally a fan of the Mutual Series investment approach, but the volatility of this fund has been much higher than I am comfortable with. I would suggest that investors consider the more globally focused Mutual Global Discovery Fund. It provides a similar, but more globally diversified asset mix with much less volatility.