| Fund Company | Mackenzie Financial Corporation |
| Fund Type | Emerging Markets Equity |
| Rating | C |
| Style | Large Cap Growth |
| Risk Level | High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Austin Forey since September 2005 |
| MER | 2.60% |
| Code | MFC 1035 – Front End Units MFC 1185 – DSC Units |
| Minimum Investment | $500 |
Analysis: Austin Forey of JP Morgan has managed this fund since September 2005 using a growth focused, bottom up approach. He favours high quality companies with strong balance sheets, have the ability to create sustainable value, and are trading at a valuation level that is reasonable based on its growth prospects.
While the process is primarily bottom up, macro and political concerns are considered when evaluating opportunities. The preference is to invest in countries that have strongly developed economies and where the markets are becoming more sophisticated. He takes a fairly patient approach, which is reflected in the portfolio turnover, which has averaged less than 20% per year for the past five years.
The portfolio is well diversified, holding about 70 names with the top ten making up slightly more than a third of the portfolio. Geographically, Asia is the biggest component of the fund at 54%, followed by Latin America at 21% and Africa and the Middle East at 11%. From a sector perspective, financials, technology and consumer staples are the biggest areas of concentration. As the region develops, it is expected that there will be attractive opportunities in the sector.
In the year end commentary, the manager stated that they believe that investors’ sentiment about the emerging markets appears to have bottomed. The macro data coming out of China appears to have bottomed and signs of improvement are emerging. They believe that valuations remain attractive and the modest growth expectations in the developed world may prove to be positive for the emerging markets.
Relative performance has been decent over the long term, however it has underperformed both the index and its peer group of late. For the five years ending January 31, the fund posted an annualized loss of 0.2% compared with the index’s annualized gain of 3.1% during the same period. Volatility has been well contained and it is one of the least volatile funds in the category.
Costs are reasonable with an MER of 2.60%, which is right in line with the category average.
On balance, this isn’t a bad option, but we do believe that there are better options available for those looking for emerging markets exposure including the Brandes Emerging Markets Fund and the CIBC Emerging Markets and CIBC Emerging Markets Index Fund.