| Fund Company | Invesco Canada Ltd. |
| Fund Type | International Equity |
| Rating | B |
| Style | Large Cap Growth |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Clas Olsson since July 2000
Jason Holzer since July 2000 |
| MER | 2.94% |
| Code | AIM 633 – Front End Units
AIM 631 – DSC Units |
| Minimum Investment | $500 |
Analysis: This non-north American equity fund is managed by Clas Olsson and his Austin, Texas based team using a bottom up stock selection process that they refer to as “earnings, quality and valuation”, or EQV. Essentially, they are looking for companies that are likely to experience above average earnings growth, have high quality and sustainable earnings, and are trading at a reasonable valuation. They tend to favour companies that are able to generate solid organic revenue growth, have pricing power in their markets, strong balance sheets and offer a more defensive growth profile.
They have the flexibility to invest in both large and mid-cap stocks that are located in Western Europe and the Pacific basin, but the focus tends to be more on the larger cap names. It is a very well diversified, holding nearly 80 names, with the top ten making up just over 20% of the fund.
Performance, particularly the longer term numbers are very strong compared with other international funds, posting first quartile returns more often than not. For the five years ending April 30, it has gained an annualized 12.6%, modestly outpacing the 12.2% gain of the MSCI EAFE Index over the same period.
In a recent commentary, the managers noted that Europe has been showing signs of modest improvement, with credit spread improving and the European Central bank remaining very accommodative, helping to provide a good environment for growth. However, the situation in the Ukraine is a wildcard that could be significantly negative to this recovery. They also note that they remain cautious and believe that valuations have risen to the point where they are ahead of what the corporate and economic fundamentals would suggest.
Cash in the portfolio sits at more than 10% as they have recently taken some profits in some names that have shown robust gains, and they have been having trouble identifying what they believe to be strong investment candidates because of the valuation concerns highlighted above. This level of cash can be a drag on performance if we see a sharp rise in the broader markets.
On balance, I believe that this is one of the best International equity funds available. It is managed by a diverse team, using a very disciplined approach. One of the bigger concerns with it would be its cost, with an MER that is fast approaching 3%.