| Fund Company | Mackenzie Investments |
| Fund Type | Canadian Focused Equity |
| Rating | B |
| Style | Value |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Lawrence Chin since April 2009 |
| MER | 2.54% |
| Code | MFC 738 – Front End Units
MFC 838 – DSC Units |
| Minimum Investment | $500 |
Analysis: The Cundill Funds have long had a reputation as being contrarian, concentrated deep value funds, and this Canadian focused offering is no different. Using a bottom up, team driven approach, they conduct extensive fundamental analysis, looking for high quality, well managed companies that are trading at a significant discount to their estimate of its true value. Typically, this will result in companies that have experienced some negative event that has caused it to fall out of favour with investors.
This results in a portfolio that looks dramatically different than the market indices. It remains significantly overweight in materials, financials, real estate and technology, and is underweight the more defensive sectors like healthcare and utilities.
This positioning helped in 2012 and 2013 which resulted in outsized gains, but has been a drag on performance so far this year. In the first four months, it has gained 2.26%, significantly lagging the S&P/TSX Composite and much of its peer group.
Another drawback to the investment process used and the concentrated portfolio is the fund can go through periods of extreme volatility. This was the case in 2008 and 2009 when it reached levels of volatility that were out of character with the longer term norms for the fund. However, those who had the stomach to handle this volatility were rewarded with strong gains. Looking at recent numbers, it appears that the fund has started to settle down to volatility levels that are more in line with historic averages.
Part of that decrease in volatility may be attributable to the fund’s high cash balance, which hasn’t been this high since 2006/07. They believe that valuations are very high and have been having difficulty finding quality names trading at a deep discount to their estimate of its true worth.
I like this fund, the investment process and the management team running it. However, I don’t believe that this is suitable as a core holding for all investors given the potential for higher than normal volatility. This fund should only be considered by those with an above average risk tolerance and a long term time horizon.