It’s pretty tough not to be impressed by a fund that has outpaced the broader equity markets by delivering an annualized five year return of more than 17%, and doing so with two thirds the volatility of the index.
Managers Michael Simpson and Aubrey Hearn look for well-managed, high yielding equity names that have the ability to deliver strong and growing cash flows. The portfolio will typically hold around 60 names, and tends to look much different than its benchmark. It can invest up to 49% of the fund in the U.S., and it can also hold preferreds, corporate bonds and low risk options to help boost the internal yield.
At the end of June, it held about 6% in cash, 5% in bond, and a modest 0.3% in prefs. Unlike a lot of yield focused funds, it has a minimal exposure to financials and does not hold any banks. Even its REIT exposure is rather modest coming in at just over 7%.
There is little doubt the longer term numbers are impressive, however it has struggled to keep pace so far this year. Some of that is likely due to the U.S. holdings, which currently sit at 34%. Even still, it is pretty tough to find a fund that has done as good a job at both growing and protecting investors’ capital. While I doubt that the historic level of return can be repeated, it is expected to continue to outperform on a risk adjusted basis over the long-term.