Mawer International Equity Fund

Analysis: This has been one of the “go to” international equity funds for as long as I been in the investment business and then some.

It is managed using a “growth at a reasonable price” approach that looks for wealth creating companies that are trading at discounts to their estimate of intrinsic value. A typical company will also generate high returns on equity. Their research process is one of the strongest in the business, with analysts conducting thorough, in-depth analysis on the company’s business model, financial position, and quality of management. Another interesting exercise that analysts put a company through is scenario analysis. They test a wide range of their assumptions to get a stronger understanding of what the company’s true worth will be under a range of situations.

The result is a portfolio that is made up of between 50 and 60 names, with the top ten making up about a quarter of the fund. Sector and country weights are largely the result of their rigorous stock selection process. At the end of June, the portfolio had nearly 80% invested in Europe.  This could result in a nice rally thanks to the European Central Bank’s recent stimulus actions. It is also heavily invested in industrials, which should benefit from an economic rebound.

Performance has been stellar, consistently outplacing most of its peers at a level of volatility that is below average. For the past five years, the fund has gained an annualized 12.5%, while the MSCI EAFE Index has gained 11.9%. Except for 2013, it has posted above average returns in every year since 2004. Volatility levels are slightly below the index, and lower than most of its peers. It offers decent downside protection, and will outperform the index more often than not.

With a great team, rock solid process, and fair pricing, it’s not hard to see why this has been and will continue to be one of the best international equity funds available to Canadian investors.