For me, the big appeal of this fund is its conservative profile, which has allowed it to post decent returns over the long term, with significantly less downside than the market, and its peers. Historically, it has delivered about 70% of the upside of the market, yet only experienced between half to two thirds of the down-side. This helps to explain why I was so disappointed with its recent performance when it dropped lockstep with the market.
I had the chance to speak with Ryan Bushell, one of the managers of the fund recently, and the main reason for this underperformance was the indiscriminate selloff of any stock that was related to energy. If you look at the fund, it has about a third invested in energy. Yet digging deeper, we see that many of these energy names are high quality, cash flow generating, conservative plays, such as pipelines and companies more focused on natural gas. This includes names such as Enbridge, TransCanada, and AltaGas. Historically, when oil sold off, these names held up much better. Unfortunately this time around, that didn’t happen, and these stocks were punished with the same veracity as their oil focused brethren.
As we move forward, Mr. Bushell believes that much of the selloff in many of the fund’s holdings was unwarranted, leaving a significant amount of upside in the portfolio. They will continue to build the portfolio on a bottom up, fundamentally driven approach that looks for companies with strong management teams and excellent balance sheets that will allow them to withstand any market cycle. They will not deviate from the same process that has worked for them since 1950. I will continue to follow the fund closely.