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During the quarter, I made a number of changes to the list. They are:
Additions:
TD U.S. Blue Chip Equity – Managed by T.Rowe Price using a bottom up stock selection process that looks to find companies that have strong management teams with the ability to effectively grow and manage free cash flow. The focus is on large cap growth names that also have a sustainable competitive advantage. I expect that this fund will deliver above average returns with a level of volatility that is in line with the peer group.
Brandes Global Small Cap Fund – Managed by the Brandes Investment team, it uses an actively managed, bottom up process that looks for companies that are trading at a discount to their estimate of its intrinsic value. The fund has a go anywhere mandate and can invest in any sector in both developed and emerging markets. They like market volatility and use it to buy into good names at attractive prices. Performance, particularly since 2008 has been very strong. Volatility has been higher than many of its peers. I expect that it will provide above average returns with above average risk.
Deletions:
Templeton Global Smaller Companies – Effective September 30, 2013, the fund was removed from the recommended list. The value focused process that manager Martin Cobb is very sound. But, when I look at the results since he took over, they are well below average. There has been a turnaround in the past year, and it had a very strong second quarter, but underperformed again in Q3. Volatility has been on the upswing, and is now above the category average. When I look at all of the factors, I believe that there are better options available.
Funds of Note:
CI Harbour Fund – In September, it was announced that Gerry Coleman would be retiring effective October 1. As a result, Stephen Jenkins would once again take over the reins of the CI Harbour Foreign Equity in addition to the Harbour Fund. Joining the team is veteran manager Roger Mortimer. Mr. Mortimer will be taking over the lead manager role for Harbour’s balanced mandates; CI Harbour Growth & Income and CI Harbour Foreign Growth & Income. This move raises a couple of concerns. First, is that with Mr. Jenkins taking on the foreign equity fund, combined with his CIO duties, the increased workload may create additional stresses. Second, while Mr. Mortimer has a very strong track record, any time there is a big change to a team, there may be growing pains. While these changes are very material, I spoke with the team in early October, and there will not be any change to the investment process that is used, and any changes that will happen within the funds will likely be very gradual. I will continue to monitor this situation to see if there is any erosion to the risk reward profiles of any of the funds affected.
CI American Value – I continue to struggle with this fund. I have liked it for a long time, and want to keep liking it, but inconsistency in its performance is making that difficult to do. My dilemma with this fund is that while the short term numbers have improved, longer term, it has still failed to keep pace with the index. I am keeping it UNDER REVIEW for at least the next quarter.
AGF Emerging Markets – While I have been impressed with the job that the management team led by Stephen Way have been doing with this fund, I continue to keep it UNDER REVIEW for the near term. Under Ms. Perez-Coutts’ management, the fund did a stellar job in preserving investors’ capital relative to its peers. I am watching its performance closely during this period of heightened volatility to see how it holds up. That will hopefully give me the comfort surrounding the new management team’s ability to effectively manage the fund going forward.