RBC O’Shaughnessy All Canadian Equity Fund

Analysis: Like the other O’Shaughnessy Funds, the RBC O’Shaughnessy All Canadian Equity Fund uses a quantitatively driven stock selection process that is highlighted in the manager’s book “What works on Wall Street”. Essentially the manager employs various screens looking for stocks that have a history of above average sales, above average trading value and above average cash flow. The manager will then pick the highest ranked stocks for inclusion in the portfolio on an equally weighted basis. This fund is a blend of his Canadian Growth and Canadian Value models.

The end portfolio is very well diversified, holding approximately 100 names. The top ten will make up just under a third of the fund. Looking at the current sector mix, it is dramatically underweight in financials and real estate, and is overweight in consumer and industrial names.

Performance has been very strong since the fund’s launch, finishing in the first quartile every year except 2009, when it lagged the index’s 35% gain. Its downside participation is comparable to the index, meaning it tends to move in step with the index when the market is down. In rising markets, the fund tends to outpace the index.

In reviewing the model’s performance in other regions, we found that it tends to be early in making stock calls. This has the potential to result in above average volatility, although to date, volatility has been in line with the index. Given the experience with other O’Shaughnessy managed funds we believe that this may also have the potential for periods of higher levels of volatility than other Canadian equity funds.

Considering all of the above, it is our opinion that this could be a good core fund for those investors with a medium or higher risk tolerance.