Dynamic Blue Chip Equity Fund

Analysis: Formerly known as the Dynamic Focus+ Equity Fund, this go anywhere equity fund is managed with the underlying philosophy that they are not simply investing in a stock, but are instead buying into a company. The manager looks for strong, well managed businesses with a demonstrated history of generating attractive returns on invested capital. They seek out high quality businesses that have pricing power and attractive growth opportunities. Valuation is also a key consideration as the they do not want to overpay.

The portfolio is concentrated, holding between 30 and 40 individual companies. The top ten currently makeup approximately 36% of the fund and is filled with household names like Microsoft, Coca Cola and Citigroup. It is well diversified across sectors, and has about 60% of the fund invested in U.S. based companies.

Despite the concentration, one of the key objectives of the fund is capital preservation. They have done a very respectable job in protecting investors money. In 2008 when the S&P/TSX Composite Index dropped by 33%, this fund was down by only 20%. Unfortunately, with its emphasis on quality, it will also lag in a sharply rising market. In 2009, coming off the market lows, it gained only 21%, dramatically underperforming the 35% rise in the broader market.

We love the philosophy of the fund, but thus far have been underwhelmed with its execution. For the three years ending May 31, the fund was up an annualized 5.4% while the Fundata North American Equity Index was up more than double that.

While we don’t believe that this fund will hurt you too badly over the long term, we also don’t expect any surprises to the upside. Considering the above, it is our view that there are more attractive opportunities in both the Canadian and global equity categories that can better serve the needs of investors.