BMO Global Energy Class

Analysis: A reader recently asked my opinion on this energy focused offering from BMO. It’s not hard to see why given the strong outperformance it has shown. For the five years ending May 31, it has gained 20.8%, handily outpacing its peer group. Even more impressive is the one year gain of more than 55%.

While these numbers are no doubt impressive, one key factor to consider is there was a manager change in May of last year. Longtime manager Robert Taylor left BMO to join Canoe Funds. After his departure, the team of Mark Serdan and Kyle Hunter took the reins.

One concern that I have with the new management team is that Mr. Serdan, while a very experienced fund manager, has focused almost exclusively on the materials and gold sector, and has little direct experience in the energy sector. On the other hand, Mr. Hunter has been actively involved in the sector since 2007, first as a research associate with Wellington West Capital, and then joining BMO Investments in September 2010.

In the year since they took over the management duties of the fund, performance has been spectacular, gaining a mind blowing 55%, second only to the Sprott Energy Fund. As impressive as this is, I would still exercise caution for a number of reasons, the biggest of which is that we cannot say for certain how much of this performance can be directly attributed to the new managers. Another concern is they have only been managing the fund for a year. Ideally I like to see a minimum of 36 months on a mandate before making a definitive call on the fund.

Given their excellent start, I will continue to follow the fund, and in the coming months will be doing a much deeper dive into the managers and their investment process to get a sense of how they stack up to their competition.