With a one year gain of 30.7%, this was the top performing global small cap fund in 2015. But this was no fluke. The fund, launched in April 2008 is identical to the highly regarded Mawer Global Small Cap Fund (MAW 150 – No Load Units). For the five years ending December 31, it has gained nearly 21 per year on an annualized basis, making it one of the best performing funds. In fact, except for 2010, it has been an above average performer in each calendar year.
Mawer has recently adopted the tag line “Be boring. Make money”, and looking at their meat and potatoes approach, it fits. The fund’s management team, headed by Paul Moroz, uses a highly disciplined, research focused, bottom up investment process that looks for companies with strong business models that earn a high return on capital, largely because of a sustainable competitive advantage. They also spend a great deal of time focusing on the company’s management. Once they have identified a potential investment candidate, they build out and stress test financial models under a number of different scenarios. They are also careful to make sure that they are buying a company at a level that is well below their estimate of its true worth.
The result is a portfolio that is dramatically different than its benchmark or peers. At the end of December, it was overweight industrials, technology and consumer staples. It’s well diversified, holding nearly 80 names with the top ten making up about 40% of the fund.
While I don’t expect the absolute performance numbers to be repeated on a go forward basis, I believe the investment process gives it the potential to be an above average performer over the long term, with strong downside protection, even with an MER of 2.48%. The only real drawback to the fund is that it has been capped since 2013 and is unlikely to reopen anytime soon.
For those looking for global small / mid cap exposure, the Trimark Global Endeavour Fund (AIM 1593 – Front End Units) or the Fidelity NorthStar Fund (FID 253 – Front End Units) are a couple of decent options.