| Fund Company | Franklin Templeton Investments |
|---|---|
| Fund Type | U.S. Equity |
| Rating | B |
| Style | Value |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| Manager | Gary Aitken since March 2008 |
| Jason Hornett since Nov. 2008 | |
| MER | 2.73% |
| Fund Code | TML 3230 ? Front End Units |
| Minimum Investment | $500 |
| Minimum Investment | $500 |
Analysis: One of the most difficult things for any investor to do with any level of consistency is to outperform the S&P 500. Many try, and many fail. There are however a few funds that can come pretty close at times, and this is one such fund.
It is managed by the team of Gary Aitken and Jason Hornett using a quantitative process that scores the U.S. equity universe on a number of valuation and quality factors. In addition to the typical valuation ratios, they screen for profitability, earnings growth and consistency, and price and earnings momentum.
The stocks are scored on the above metrics and then ranked best to worst, with the top 40 names making up the portfolio in equal weights. Because it is based on the quantitative ranking of stocks, and there are no limits on sector exposure, the end portfolio has the potential to look dramatically different than the index.
That is certainly the case at the end of February when it was significantly overweight in healthcare and consumer defensive names, while being underweight in consumer cyclical and energy. As with most Bissett funds, they favour dividend paying stocks. As a result, most of companies in the fund pay dividends and the yield is well in excess of what is offered by the index.
The model is rerun monthly and any stock that has a weight of more than 3.5% will be rebalanced back to the 2.5% target weight. Any name that has fallen dramatically in the rankings will be replaced by the next best ranked security.
Performance has been solid, on both an absolute and risk adjusted basis. For the five years ending February 28, it has gained 18.4%, outpacing most of its competition. Volatility has also been significantly lower, resulting in excellent risk adjusted returns. Unfortunately this has lagged the S&P 500 on both an absolute and risk adjusted basis. Even still, this is much better than the average U.S. equity fund.
I still believe that most investors would be better off with an index product when looking for pure U.S. equity exposure. However, for those who prefer an actively managed mutual fund, this is definitely one to consider.