| Fund Company | Mackenzie Financial Corporation |
| Fund Type | Canadian Focused Equity |
| Rating | C |
| Style | Mid Cap Value |
| Risk Level | High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Lawrence Chin since April 2009 David Slater since April 2009 |
| MER | 2.49% |
| Code | MFC 738 – Front End Units MFC 838 – DSC Units |
| Minimum Investment | $500 |
Analysis: The Cundill Funds have long had a reputation as being contrarian, concentrated deep value funds, and this Canadian focused offering is no different. Using a bottom up, team driven approach, they conduct extensive fundamental analysis, looking for high quality, well managed companies that are trading at a significant discount to their estimate of its true value. Typically, this will result in companies that have experienced some negative event that has caused it to fall out of favour with investors.
While Canadian in focus, it can invest up to 49% of the fund globally. The portfolio tends to be concentrated, typically holding less than 30 names, with the top ten making up about two-thirds of the fund.
Historically, Cundill funds have tended to be some of the least volatile in their respective categories. This changed after 2008, when volatility spiked substantially to the point where it caused us great concern. In speaking with members of the Cundill team, this increase in volatility is attributed to their deep value style. Seeing opportunity, they invested in a number of companies going through some turbulent times such as U.S. banks and some timber companies like Canfor and West Fraser. They were a bit early in buying these names as they continued to experience extreme volatility.
Fast forward a couple of years and the very stocks that were causing this uptick in volatility are now largely responsible for the sharp increase in return that the fund has been experiencing. In 2012 the fund gained 20%, easily outpacing the index and its peer group. Longer term results have also been strong, with a five year annualized return of 5.5% as of January 31, again, handily outpacing the benchmark.
In a recent commentary, they noted that it has become increasingly difficult to find suitable investment opportunities in Canada. As a result, cash levels have risen, and as of December 31, it held about 19% in cash. They expect to deploy this as suitable investments are found. The fund currently holds 49% in Canadian equity, 31% in U.S. equities and 19% in cash.
Over the longer term, we believe that investors will be rewarded with above average gains with this fund. However, as shown since 2008, it may be prone to periods of extreme volatility. While we don’t expect to see a return to the recent volatility levels, higher than average risk is possible. Because of this, we believe that this is a good core holding for only those investors with an above average risk tolerance.