| Fund Company | Fidelity Investments Canada |
| Fund Type | Canadian Focused Equity |
| Rating | A |
| Style | Value |
| Risk Level | Medium |
| Load Status | Optional |
| Manager | Daniel Dupont since March 2011 |
| MER | 2.29% |
| Code | FID 231 – Front End Units FID 531 – DSC Units |
| Minimum Investment | $500 |
Analysis: This has long been one of my favourite Canadian equity funds, and manager Daniel Dupont has done a stellar job since taking the reins. Between March 2011 and September 2013, the fund has gained nearly 40%, while the S&P/TSX Composite Index has lost nearly 2.3%.
This past quarter the outperformance took a pause. This is not unexpected given the sharp run-up the fund had in the second quarter of the year. When commenting on the fund in July, I said “While I have a lot of confidence in Daniel Dupont’s style, process and approach, I would strongly suggest that you take advantage of the recent gains and rebalance your portfolio, taking some profits off the table. For the long term, I still believe that this is a great core holding for most investors.”
I stand by those comments. Mr. Dupont’s process is built around preserving capital and protecting downside risk. Thus far, he has been very successful, with below average volatility and strong outperformance in down markets.
To do this, he uses a bottom up, fundamentally driven, value focused stock selection process that looks to buy strong, well managed companies that have unrealized growth potential that are trading at a significant discount. An ideal investment candidate has a sustainable business model and is expected to deliver high return on capital. The upside potential is carefully considered with the downside risk.
The concentrated portfolio is focused on Canada, but can invest up to 49% of the fund abroad. As of August 31, it held approximately 40 names with the top ten making up 43% of the fund. It is looks dramatically different than the index, with no exposure to materials and a significant underweight in financials and energy.
While I don’t expect that the absolute level of outperformance can be sustained, it remains one of my top picks in the Canadian equity category. Its costs are reasonable, the expected risk reward profile is favourable, and it looks much different than the index. This is exactly the type of fund you want when you are considering an actively managed fund.