The last time I reviewed this fund was April 2013, shortly after Clayton Zacharias had taken over the management of the equity portion of the fund. At the time I said I was “…cautiously optimistic that with Mr. Zacharias managing the equity portion that we will see a sustained improvement in overall returns.” Turns out I was right.
Performance has definitely improved, with the fund boasting an annualized five year gain of 7.1%, handily outpacing its rivals and its benchmark.
In managing the equity sleeve, the team has built a concentrated portfolio of high quality Canadian companies that are trading at attractive valuations. It will typically hold between 25 and 35 names, and they are not afraid to raise cash when no suitable opportunities are available. At the end of March, they held around 5% in cash after putting some cash to work.
The fixed income sleeve is managed by a team headed up by Jennifer Hartviksen. They are currently overweight in corporate bonds and are very defensively positioned. At the end of March, the duration was listed at 3.84 years, which is about half that of the FTSE/TMX Canadian Universe Bond Index. This will certainly help in periods of rising yields and bond market volatility. The yield to maturity is also above the benchmark, which will help drive returns in a flat rate environment.
The asset mix is 5% cash, 22% bonds, and the balance in Canadian and U.S. equities.
The fund’s volatility has been above average, but given that it tends to carry a higher equity weight than a lot of its peers, this is not unexpected.
While performance has definitely improved, the conservative positioning and contrarian nature will likely lead it to underperform in rising markets, but hold up well in falling markets and volatile times.
I prefer the SC units over the Series A units because they carry a lower cost. Still, I think this can be a great core balanced fund for those looking for a concentrated, Canadian focused balanced fund.