| Fund Company | Bridgehouse Asset Managers (Formerly Brandes Funds) |
| Fund Type | Canadian Focused Small / Mid Cap Equity |
| Rating | A |
| Style | Value |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Brandes Investments Management Team |
| MER | 2.73% |
| Code | BIP 121 – Front End Units BIP 221 – DSC Units |
| Minimum Investment | $1,000 |
Analysis: After taking a beating in 2007 and 2008, performance has really bounced back sharply, gaining an annualized 18.7% for the three years ending November 30, 2013, handily outpacing the index and the majority of the other small and mid-cap focused funds in the country.
Much of this outperformance is due to its concentrated, bottom up, deep value approach. Managed by a team at Brandes, this portfolio looks nothing like its benchmark. It is significantly underweight in materials, energy and real estate, while maintaining an overweight in technology, communications, and consumer focused sectors. It is classified as a small / mid cap fund, but it really has an all cap mandate and can invest in companies of any size, and currently has exposure to companies of all sizes.
It is a concentrated portfolio, holding 22 names, with the top ten equity holdings making up around 45% of the fund. It also has a very healthy exposure to global stocks through its 33% holding of the Brandes Global Equity Fund.
Volatility has been higher than both the index and its peer group, but if we look at how it has performed in down markets, it has held up much better than the benchmark. For the three years ending September 30, on average, the fund has experienced 132% of the upside of the S&P/TSX Composite Index, yet only experiencing 47% of the downside.
Despite this, I would be reluctant to use this as a core holding. I believe it is just too volatile for most investors. Instead, I would go with something larger cap for a core holding. Also, while recent performance has been excellent, as with any fund where the managers are disciplined and remain true to their style, the fund may experience periods of significant underperformance.
While I wouldn’t recommend it as a core holding, I do think it can be a nice compliment in a portfolio, bringing some all cap equity exposure into the mix. There are a lot of things to like about it, including the strong management team, disciplined, repeatable process, and a portfolio that looks nothing like its index.