| Fund Company | Invesco Canada Ltd. |
| Fund Type | U.S. Small / Mid Cap Equity |
| Rating | B |
| Style | Blend |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Rob Mikalachki since August 2002 Virginia Au since August 2006 |
| MER | 2.91% |
| Code | AIM 5523 – Front End Units AIM 5521 – DSC Units |
| Minimum Investment | $500 |
Analysis: The team of Rob Mikalachki and Virginia Au manage the fund based on the basic Trimark philosophy of “business people buying businesses”. The process used is very much a value focused, bottom up approach where the managers are looking for high quality, well managed stocks that are largely ignored by the rest of the investment world. They look for good management teams that are typically the number one or number two ranked companies in their industry.
The portfolio is concentrated, holding just over 30 names with the top ten make up 45% of the fund. Technology makes up 32% of the fund, followed by consumer discretionary and healthcare. The investment process is a patient one where the managers take a long term view when assessing the prospects of a company. This is reflected in the relatively low levels of portfolio turnover, which has averaged 45% for the past five years.
Cash, which is the byproduct of the team’s valuation discipline made up nearly 24% of the fund at March 31. In recent months, with the markets on a tear, this high level of cash has acted as a drag on the performance of the fund. Still, returns have been strong, posting a one year return of 17.5% as of April 30. Longer term numbers are also strong, posting a five year gain of 12.0% and a 10 year return of 8.4%. Volatility has been in line with the peer group.
The team has used the recent market run-up to trim some positions that have experienced strong gains of late. Another consequence is they are having trouble in the current environment finding high quality companies that meet their valuation criteria, which explains the high cash balance. Should markets continue to rally, this will continue to drag performance. But when markets do correct, they will be able to buy high quality names at attractive prices.
It is our opinion that this is a great fund for investors who are looking for a U.S. small / mid cap fund that looks much different than the index. Investors should be aware that because of the manager’s investment style, there may be periods of higher than normal volatility and the fund my experience periods of underperformance.