| Fund Company | Scotia Asset Management |
| Fund Type | Canadian Focused Equity |
| Rating | $$ |
| Style | Growth |
| Risk Level | Medium |
| Load Status | No Load |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Alex Lane since January 2012 |
| MER | 2.17% |
| Code | BNS 372 – No Load Units |
| Minimum Investment | $500 |
Analysis: Shortly after Scotia acquired Dundee, they replaced the managers on this fund with Rohit Sehgal, who manages the growth focused Dynamic Power Canadian Growth Fund. Unfortunately Mr. Sehgal’s style did not turn things around with the fund and he was replaced in early 2012 by Alex Lane.
Mr. Lane uses a bit more of a balanced approach to growth, that uses a combination of top down analysis to help identify what he expects to be the most attractive sectors for the next three to five years. He then conducts a fundamentally driven, bottom up research that looks to identify high quality businesses with sustainable growth.
To help manage volatility, he combines both core and cyclical elements in his portfolios. Core holdings are typically growth companies that have strong fundamental businesses that are likely to be less sensitive to the economy as well has having demonstrated the ability to grow dividends over time. The cyclical portion of the portfolio is made up of economically sensitive names that generate most of their returns through capital appreciation.
The portfolio tends to be concentrated, holding around 40 names. As of August 31, it held 42, with the top ten making up 37% of the fund. He can invest in companies of any size, but the current focus is on large caps, which make up about two-thirds of the fund. The sector exposure is similar to the S&P/TSX Composite Index, as energy, financials and industrials make up 57% of the fund.
Since Mr. Lane took over, returns have definitely improved on both an absolute and relative basis. On a year to date basis, the fund is up 4.5%, handily outpacing the index and peer group. While the period is much to short to make a sound judgment, we are cautiously optimistic about the fund.
Another positive factor is that the MER is 2.17% for the no load version, which is well below the category average.
Our biggest concern with this fund is the level of volatility. Without exception, Power branded funds tend to be more volatile than other funds with a similar mandate. Given that this fund is managed in the same way, we would expect that its volatility will also be higher.
We are taking a wait and see approach with this fund. The manager’s short tenure and our expectation of higher volatility are preventing us from upping our rating at the moment.