Trimark U.S. Companies Fund

Analysis: Typically, when one thinks of the traditional Trimark investing discipline, what often comes to mind is a process that is more value focused, looking to buy high quality businesses that are trading below their estimate of it’s true worth. In the case of the Trimark U.S. Equity Fund, the same basic methodology is employed, with the difference being that it is employed in a more growth focused way.

That explains why the fund holds nearly 30% in technology, and the top holdings of the fund include more growth focused stocks such as Apple, EMC and Analog Devices. Manager Jim Young has built a concentrated portfolio of U.S. based businesses that have strong management, distinct proprietary advantages, and a history of generating long term cash flows. But where this fund appears to differ from other Trimark funds is the manager pays particular attention to companies that have a proven ability to profit from technological advances, and who have invested significantly to obtain their competitive advantages.

The portfolio is fairly concentrated, holding approximately 45 names, with the top ten making up over one third of the fund. In addition to its overweight position in technology, it is also heavily weighted towards industrials and healthcare stocks. Not surprisingly, the fund is underweight in energy. The fund is nearly fully invested, holding just 1% in cash.

The manager’s process is fairly patient, with a level of portfolio turnover which has averaged around 50% per year. This indicates that the implied holding period for each stock in the fund is approximately two years.

Performance for the fund has been basically flat for the past five years, which was better than the S&P 500 which posted an annual compound loss of 0.9% during the same time frame. This level of performance puts it above the average U.S. equity fund. The volatility is roughly in line with the broader market, which is good for a more growth focused fund, which are usually higher risk.

The fund is not cheap, with an MER of 2.97%. This is well above the category median of 2.45%.

The manager remains positive on U.S. equities after investors recognized that the U.S. economy was showing signs of improvement and consumer sentiment is strong. He also points out that many investor portfolios are underinvested in equities, which has the potential to provide additional support for equity prices as investors shift out of fixed income as interest rates look to move higher.

It is our opinion that this fund may be a good core U.S. equity holding for investors who have at least a medium risk tolerance and a long term time horizon.