CI Signature Canadian Resource Fund

Analysis: With uncertainty over China and continued economic woes in Europe weighing on commodities, resource funds have struggled of late. This fund is no exception, losing 9.1% for the year ending February 28. While this is disappointing, it managed to outpace the Fundata Natural Resources Index, which was down more than 14%.

Manager Scott Vali and the Signature Team focus predominantly on large cap resource companies located in Canada and around the world. The investment process uses a top down macro analysis which helps determine the sector and commodity exposure within the fund. They then undertake a bottom up stock selection process that looks for companies with strong fundamentals and the ability to deliver strong cash flows for investors. They are not afraid to use cash tactically during periods of elevated volatility.

Given the more conservative nature of this fund, it has had periods where it has lagged the benchmark, most notably in 2010 when the fund returned 15.4%, while the index was up by nearly 23%. Over the long term, the fund has consistently ranked in the upper half of the category.

The cost of the fund is reasonable, with an MER of 2.41%, which is approximately 20 basis points below the category median.

The fund is currently invested 51% in Canadian equities, 27% in U.S. equities with 11% invested in the European Union. Cash is sitting at 7%. It has 58% invested in energy, 32% in materials, with the balance in cash and other sectors.

Despite a recent downgrade based more on the category as a whole, this fund remains one of our favourites largely because of the manager’s focus on managing risk. With continued uncertainty expected in the sector, risk management will be of paramount importance going forward. This is not the flashiest fund in the category, but in our opinion is a good fund for long term focused investors seeking exposure to the resource sector.