| Fund Company | RBC Global Asset Management |
| Fund Type | Canadian Focused Equity |
| Rating | A |
| Style | Blend |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Stuart Kedwell since May 2005
Doug Raymond since May 2005 |
| MER | 2.11% |
| Code | RBF 554 – No Load Units
RBF 766 – Front End Units RBF 857 – DSC Units |
| Minimum Investment | $500 |
Analysis:The team of Stuart Kedwell and Doug Raymond use a multi stage portfolio construction process that incorporates both quantitative screening and fundamental, bottom up analysis.
The first stage in their process is a series of quantitative screens that weed out the undesirable companies in their selection universe. Then the team conducts a fundamental analysis on each of the companies and conducts a series of scenario analysis, looking at a wide range of possible outcomes for each stock. Stocks are also evaluated using a 2 Factor Matrix Model that evaluates earnings projections relative to valuation. They are looking for companies that are attractively valued, are fundamentally sound, and offer above average returns on capital.
The fund can invest up to 49% in non-Canadian stocks, and have been increasing their allocation to U.S. stocks over the past year. At the end of December, 46% was invested in U.S. names compared with 42% in Canadian companies. This country allocation is a by-product of the stock selection process, rather than a macro call.
The fund’s cash position, currently at 10%, is determined by two main factors; the availability of quality opportunities and the team’s macro call on the markets. As a policy, half of the fund’s foreign currency exposure is hedged.
The portfolio tends to be fairly well diversified holding more than 100 names, with the top 10 making up 19% of the fund. The managers are active, with high levels of portfolio turnover.
Performance, particularly over the longer term has been strong, posting a 14.95% gain, handily outpacing the S&P/TSX Composite, finishing in the top quartile. Shorter term however, performance has slid a bit, with a six month gain of 9.53%, trailing the index. This is somewhat troubling given the fund’s asset mix. This is definitely something I am watching closely. Volatility has trended lower than both the broader market and the Canadian focused equity category average.
This has been a very strong performer that has rewarded investors with above average returns and below average volatility for a number of years. In addition to the recent slip in performance, another thing I am watching closely with this fund is its level of assets. A year ago, it had assets of $654 million, yet at the end of December, assets had risen to more than $1.7 billion. With the focus primarily on large cap names and the ability to invest heavily in the U.S, capacity shouldn’t be a problem for some time.
All things considered, I still believe that this is a very solid Canadian equity fund that is expected to deliver above average returns with below average risk for some time.