| Fund Company | BMO Investments Inc. |
| Fund Type | Global Equity |
| Rating | D |
| Style | Blend |
| Risk Level | Medium |
| Load Status | No Load |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Sri Iyer since September 2012 Sam Baldwin since September 2012 Fiona Wilson since September 2012 |
| MER | 2.64% |
| Code | GGF 70211 |
| Minimum Investment | $500 |
Analysis: In September 2012, a new management team headed up by Sri Iyer of Guardian Capital took over the reins of the fund. The dividend focused process that Sri and his team use is referred to as “GPS”, which stands for Growth, Payout and Sustainability.
Growth refers to the growth in the dividend, which studies have shown over time, are one of the biggest components of total return for an investor over time. Payout refers to not only the amount of a company’s earnings that are paid out in dividends, but also the quality of that payout. Finally, Sustainability refers to a company’s ability to continue to not only pay, but grow their dividends over time.
The process used is very quantitative in nature and considers a number of metrics that focus on a company’s growth, efficiency, credit risk, valuation, payout and valuation. Stocks are continually rated and ranked on these factors with the top ranked companies representing the buy candidates while the lower ranked companies are the sell candidates.
A typical company that is included in the fund will often offer a yield advantage of 1%-2% over the yield of the index. They look for stocks across all industry sectors to actively position the portfolio through all market cycles. As a result, the portfolio turnover is expected to be very high.
Since taking over, the fund has gained 7.8%, which has lagged the 13.0% gain in the MSCI World Index. Guardian has been running this mandate in an institutional version where the longer term returns have been strong. Adjusting the fund for the impact of management fees, performance over a three and five year period was in the same ballpark as the MSCI World, with less volatility.
Investors can also access this mandate through an ETF offered through Horizons, the Horizons Active Global Dividend Fund (TSX: HAZ).
Longer term, we expect that the performance of the fund will improve on a relative basis and expect that over time it will deliver index like returns with lower volatility.
This isn’t a fund that will shoot the lights out, but it also is not likely to hurt you in periods of higher than normal market volatility. For example, the institutional version of this fund, adjusted for fees was down 20% in 2008 while the MSCI World lost 26.6%. In 2011 the MSCI World was down by 2.9%, we estimate the fund would have gained 3.3% when adjusted for fees.
One drawback to the fund is that it is expensive, with an MER of 2.64%, which is in the upper half of the category. Despite that higher cost, we see this as a good core global equity holding for most investors.