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Analysis: Despite struggling in 2010, the CI Harbour Fund, managed since its launch by Gerry Coleman and Stephen Jenkins is back. In 2010, the fund lagged the S&P/TSX Composite by a significant margin, as the higher beta, more cyclically driven names drove the index higher. Given the managers’ somewhat more conservative, value focused approach, this underperformance, while disappointing to investors, was not unexpected.
The fund is a Canadian focused equity fund, meaning it can invest up to 49% of the fund in foreign markets. The fund also has the ability to invest in mid cap stocks, but given the size of the fund, currently at $3.6 billion, combined with the manager’s concentrated style, don’t expect to see many mid cap names. Currently, the fund holds just under 40 names with the top 10 holdings making up 40% of the fund.
The fund is managed with a value tilt and the manager focuses on quality companies that have strong balance sheets, a strong management team, and leadership within their respective industries. The manager is patient with portfolio turnover that is very low.
The fund currently holds 50% in Canadian equities, 25% in U.S. equities and 12% in international equities. The portfolio is heavily weighted towards energy, financials and materials. Combined, those three sectors make up 53% of the portfolio.
Year to date, the fund has delivered top quartile performance for investors. The longer term numbers are equally impressive, with impressive relative returns in all time periods, with the exception of 2003. Given the manager’s focus on quality and conservative nature, this fund will likely lag in sharply rising markets.
There is some key person risk with this fund giving the Gerry Coleman has been largely responsible for the performance of the fund. It should be pointed out that Stephen Jenkins has worked with Mr. Coleman on this fund since it’s inception. However, when Mr. Coleman does step down, we will review the new management team and how it intends to continue to manage the fund.
In the near to medium term, given our expectations that market volatility will remain high, the CI Harbour Fund will likely continue to be a solid choice for long term, patient investors