| Fund Company | First Asset Funds Inc. |
| Fund Type | Canadian Dividend & Income Equity |
| Rating | A |
| Style | Blend |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | John Stephenson since April 2010 |
| MER | N/A 2.0% Management Fee |
| Code | CRT 6103 – Front End Units CRT 6100 – DSC Units |
| Minimum Investment | $500 |
Analysis: Originally launched as a closed end fund in 2010, it was converted into a mutual fund in April of last year. Since its launch, it has done a tremendous job of delivering above average returns with below average risk.
To do this, manager John Stephenson and his team pore over mounds of economic data, constantly trying to get an accurate picture of where we are in the business cycle. With this knowledge, they determine the sectors that they believe will outperform. They then conduct fundamental research on companies operating in those sectors looking for well managed companies that offer not only an attractive dividend yield, but one that is also sustainable and likely to grow.
The result is a concentrated portfolio of 40 names, typically concentrated in only a handful of market sectors. Currently, the fund is heavily weighted in energy, financials and utilities. While the fund is Canadian focused, they can invest up to 30% globally. They are currently at the maximum, with all of that exposure invested in the U.S., a market they believe is on the upswing with a rebounding housing market and strong financial fundamentals.
They are quite tactical in their approach, not afraid to raise cash significantly when they believe trouble is on the horizon. For example, in September 2011, they moved cash up to more than 50% of the fund, which helped protect investors from a large loss in the latter half of the year. The fund gained 11% that year, while the index dropped by nearly 9%.
As impressive as the returns have been, the volatility numbers have been even better. Since its launch, the fund has been about half as volatile as the broader equity markets, and has been well below its peer group.
It pays a monthly distribution of $0.05 per unit, which works out to an annualized yield of approximately 5%. Considering the total return profile of the fund, it is our opinion that this is sustainable, without experiencing significant erosion in capital.
Considering all the above, we like this fund. Historically, it has offered a very compelling risk reward profile for investors. One risk of the fund is that the concentrated approach, both to sector allocation and security selection could work against you. If they misjudge the economy they could be in the wrong sectors, or if they are sitting on a high cash balance and the markets rally, it will be left behind. However, given the fund’s relatively small asset base, the managers can be quite nimble, and should be able to adjust the portfolio quite quickly on the fly if necessary.
It is our opinion that this fund can be a good option for those looking for actively managed, income producing Canadian equity exposure.