Manager Steve MacMillan has done a stellar job with this small cap offering since taking it over in 2011. In the past three years, it has gained more than 33%, outpacing both the index and peer group by a wide margin. This outperformance continued in the first quarter, gaining an impressive 18.9%, thanks to a strong showing from its consumer and technology names, combined with a falling Canadian dollar.
The investment process is a fundamental, bottom up approach that looks for companies with strong management, sustainable competitive ad-vantages, a high degree of earnings visibility and the ability to grow earnings in the future. At the moment, he is finding these opportunities in the technology, consumer, and healthcare sectors.
I know I have said this a few times in the past, but this level of past performance is not likely to be sustainable going forward. If you have held this fund for a while, it may be a good idea to rebalance and take some money off the table. Still, when I look at the valuation of the underlying portfolio, it looks well positioned to outpace the index and its peer group going forward. It remains my top pick in the U.S. small cap space.