Managed by the team of Alan Wicks, Conrad Dabiet, and Jonathan Popper, using a bottom up, fundamentally driven process that seeks out businesses of any size that have high returns on invested capital. Each potential investment candidate is scored on a number of factors, including stability and level of their earnings power, managerial skill and ownership, and financial leverage. A deeper due diligence review is conducted on the most attractive opportunities. This includes meetings with management and generating an estimate of fair value. They also determine buy and sell prices. Once a company is in the portfolio, they actively manage position sizes based on real time valuation levels. The closer a name is to its buy price, the greater the weight it has in the fund. Surprisingly, turnover levels have been modest, averaging around 70% for the past three years.
It is much different than many other dividend mandates, with an underweight in energy and financials. It can invest outside of Canada, and has about 30% in the U.S. at the moment. They will also hedge part of their currency exposure.
Performance has been excellent, but more impressive is the volatility has been significantly lower than the broader market and its peer group. Further, it has done an excellent job of protecting capital in falling markets. While the retail version of this fund is only a few years old, it has been operating as an institutional mandate since June 2004 with similar risk reward metrics.
I don’t see the absolute levels of return likely to be repeated, but I expect that it will be able to produce above average returns with less risk. I see this as a great core holding for investors looking for core Canadian equity exposure.