| Fund Company | IA Clarington Investments Inc. |
| Fund Type | Canadian Small / Mid Cap Equity |
| Rating | C |
| Style | Mid Cap Blend |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Ian Cooke since November 2008 Joe Jugovic since March 2007 |
| MER | 2.92% |
| Code | CCM 520 – Front End Units CCM 521 – DSC Units |
| Minimum Investment | $500 |
Analysis: This Canadian small / mid cap equity fund has been managed by the team of Ian Cooke and Joe Jugovic at QV Investors since 2008. The QV in the name stands for quality and value, which is how they evaluate stocks.
The first step is to identify quality companies and the second phase is to consider valuation levels. In doing this, they look for attractively valued companies that are managed by capable, honest management teams. Characteristics they look for include balance sheet discipline, a solid business plan and the potential to see growth in the company’s book value per share, sales per share and earnings per share, which they believe can help the company to sustain difficult periods.
Quality of management is a critical factor in their evaluation process and they look for managers who hold a significant stake in the business, which helps to ensure that their interests are aligned with the investors.
With their focus on quality, this fund tends to perform well in flat and falling markets, but often lags in a sharply rising market. This is because in that type of market, the quality companies tend to lag while the higher beta, more leveraged companies shine. Over the long term, quality should outperform.
Judging by the performance numbers, this appears to be true. For the 10 years ending October 31, the fund gained 10.7%, outpacing both the index and the category average. Equally impressive is the fact that the fund’s volatility has been lower than both the category and the index.
The biggest drawback to this fund is that it is fairly expensive, with an MER of 2.92%, which is well into the upper half of the peer group.
We believe that this is a high quality fund that will do well over the long term and will definitely earn its stripes in periods of high volatility. For investors who are interested in SRI, Ethical Funds offers the Ethical Special Equity Fund which is very similar except that its holdings have been put through Ethical’s rigorous ESG screening criteria.