| Fund Company | CI Investments |
| Fund Type | Canadian Focused Small / Mid Cap Equity |
| Rating | A |
| Style | Value |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Joe Jugovic since December 2005 Leigh Pullen since December 2005 |
| MER | 2.42% |
| Code | CIG 6104 – Front End Units CIG 6154 – DSC Units |
| Minimum Investment | $500 |
Analysis: The team follows a relatively simple philosophy – find quality businesses trading at attractive valuations. To do this, they look for high quality companies with a demonstrated history of generating high returns on equity, and that have lower debt to equity and debt to cash flow ratios than the broader markets. They also like companies that pay a dividend to investors. The end result is a relatively concentrated portfolio holding 31 names. As of June 30, the top 10 stocks made up just under 45% of the portfolio.
With their emphasis on quality and dividends, it is not surprising to see that financial services is the fund’s highest weighted sector, at more than 23%. The portfolio is underweight resources because it is highly volatile and many companies do not generate consistently strong returns on capital. It has a modest 14% weight in energy, with minimal exposure to materials.
This positioning results in a portfolio that looks very different than its benchmark which comes through with returns that are also quite different. For example, in June when the BMO Small Cap Index was off by more than 4.6%, this fund was higher by 1.8%. For the past twelve months, a similar pattern emerges with the fund gaining nearly 25% while the index fell by 1.2%.
As impressive as the returns have been, the level of volatility it has experienced is even more impressive. Over the past five years, it has shown a level of volatility that is significantly lower than its index, peer group, and even the broader S&P/TSX Composite Index. Their approach is fairly patient, with portfolio turnover averaging around 25%.
The fund is managed quite similarly to the IA Clarington Canadian Small Cap Fund, and the Ethical Special Equity Fund. The big difference between them is that this fund is more mid cap focused, while those funds focus more in the small cap space.
Given the fairly conservative nature of the fund, I would expect that it will generate very strong risk adjusted returns going forward. However, it is very likely that in a rising market environment it will lag its peer group. Still, for those looking for conservative small and mid cap exposure, this is one of our favourites, especially since the capping of the Mawer managed BMO Enterprise Fund.