Scotia Pacific Rim Fund

Analysis: Shortly after Scotia acquired Dundee, they replaced the managers on this fund with Chuk Wong, who manages the Dynamic Far East Value Fund, which is one of our top picks in the Asia Pacific Equity category. An encouraging note is that since Mr. Wong took over the management duties of this fund, it has actually outpaced his Dynamic offering. Perhaps the biggest reason for this is that this fund is more focused on large cap stocks, while the Dynamic version will go a bit more into the mid cap space.

In managing the fund, a fundamentally driven, bottom up process is used to select stocks. To assist him with sector and country allocation, he will also pay some attention to the global macro environment. He is looking for attractively valued companies that are currently out of favour with investors.

His outlook for Asian equities is positive based on the regions falling inflation rate, lower oil and energy prices, accommodative monetary policy, and stabilizing economic growth combined with reasonably attractive validations. He believes that the Chinese economy is no longer being driven by exports. As a result, he is favoring companies that are well positioned to benefit from this rise in domestic consumption.

With the previous management team, portfolio turnover was high, averaging in the 100% range. It is expected that this will fall with Mr. Wong at the helm as his Dynamic Far East Value Fund has shown turnover that has averaged around 18% per year.

While we expect that this fund will improve on a risk reward basis, we believe that it is far too expensive relative to other funds in the category that look to be more attractive to us. The MER is 3.01%, which is well above the category average of 2.71%.

Considering the above, it is our opinion that there are better options available in the category.