| Fund Company | Fidelity Investments Canada |
|---|---|
| Fund Type | Canadian Focused Equity |
| Rating | A |
| Style | Large Cap Growth |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| Manager | Mark Schmehl since March ’11 |
| MER | 2.29% |
| Fund Code | FID 265 – Front End Units |
| FID 565 – DSC Units | |
| Minimum Investment | $500 |
Analysis: Since stepping into the manager’s chair in March 2011, Mark Schmehl has done an excellent job. For the four years ending March 31, it gained an annualized 17.4%, handily outpacing the fund’s benchmark. This puts it firmly in the top quartile, making it one of the best performing funds during the since Mr. Schmehl took the reins.
This is a portfolio of medium and large sized companies that he believes have a sustainable competitive advantage and a growth rate that is substantially higher than their competitors. To find these companies, a fundamentally driven, bottom up investment process that looks for well managed companies that have strong free cash flows, healthy balance sheets, and a clearly defined growth drive in place.
It is very actively managed, with a portfolio turnover rate that is well above 200% in the past four years. It can invest up to 49% outside of Canada and they are taking full advantage of that. As of February 31, the fund was invested 50% in Canadian equities and 49% abroad. It is very heavily weighted towards healthcare and technology, which combined make up nearly half the fund. Consumer names are also well represented.
Given the fund’s growth focus, it is not surprising to see it dramatically underweight in energy, materials, and financials. Despite the sector concentration, the fund is reasonably diversified, holding just under 80 names, with the top ten making up nearly 40%.
Volatility has increased in the past four years, and is now above average. But given the growth focus and mid to large cap mix, it is not unexpected. With the fund’s sector concentration, I expect that volatility will remain above average, and we could see a sharp pullback if there is a hiccup in either tech or healthcare.
It is because of this that I would be reluctant to suggest it be suitable as a core holding for most investors. Instead, I see this as a potential compliment to a more conservative equity fund in a well-diversified portfolio. Within the Fidelity family, my pick for that more conservative pick would be the Fidelity Canadian Large Cap Fund, which is a more concentrated, value focused offering managed by Daniel Dupont. Combined, the two funds could make a great mix