| Fund Company | RBC Global Asset Management |
| Fund Type | Canadian Focused Equity |
| Rating | B |
| Style | Large Cap Blend |
| Risk Level | Medium |
| Load Status | No Load / Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Stuart Kedwell since May 2005 Doug Raymond since May 2005 |
| MER | 2.10% |
| Code | RBF 554 – No Load Units RBF 766 – Front End Units |
| Minimum Investment | $500 |
Analysis: The team of Stuart Kedwell and Doug Raymond use a multi stage portfolio construction process that incorporates both quantitative screening and fundamental, bottom up analysis.
The first stage in their process is a series of quantitative screens that weed out the undesirable companies in their selection universe. Then the team conducts a fundamental analysis on each of the companies and conducts a series of scenario analysis, looking at a wide range of possible outcomes for each stock. Stocks are also evaluated using a 2 Factor Matrix Model that evaluates earnings projections relative to valuation. They are looking for companies that are attractively valued, are fundamentally sound, and offer above average returns on capital.
The fund can invest up to 49% in non-Canadian stocks. They look at both Canadian and U.S. stocks, with the country allocation being a by-product of the stock selection process. The fund’s cash position will be determined by two main factors; the availability of quality opportunities and the team’s macro call on the markets. As a policy, half of the fund’s foreign currency exposure is hedged.
The portfolio tends to be fairly well diversified holding more than 100 names, with the top 10 making up 22% of the fund. The managers do tend to be active, with high levels of portfolio turnover.
The fund has performed very well of late, outpacing the S&P/TSX Composite and its peer group, posting solid first quartile performance. Volatility of the fund has also trended lower than both the broader market and the Canadian equity category average.
In recent months, the managers have been increasing their exposure to the U.S. market. As of November 30, the fund was 43% in Canadian equities, 45% in U.S. equities, 3% in international equities and 9% in cash. The three main sectors are financials, energy and consumer discretionary, which combined make up 58% of the fund.
We like the fund for a number of reasons including the management team and process, a reasonable 2.10% MER, the volatility profile of the fund, and the fact that the fund is still small enough at $654 million to allow the managers to implement their process. Asset growth has been strong, adding more than $200 million in 2012. We will want to monitor this to ensure that the fund doesn’t get too large, however, given the ability to invest up to 49% outside of Canada, the managers do have a great deal of flexibility which should enable them to implement their process for some time.