The emerging markets space has been a tough slog for many of late, and this fund is no exception. For the year ending March 31, it was down 12%, lagging both the index and much of its competition.
It has been managed by a team headed up by Patricia Perez-Coutts since August 2012. You may recall Ms. Perez-Coutts had tremendous success previously at AGF. Unfortunately, a repeat of this success has thus far been elusive, but there are signs things are turning around.
The process and team are nearly identical from when she was with AGF. The process uses a number of fundamental quantitative screens to identify potential investment candidates, followed up by rigorous bottom up analysis that looks for sustainable competitive advantages, growth drivers, and the potential for continued free cash flow generation. Any investment must also have a strong financial outlook.
The portfolio typically holds between 70 and 90 names, most of which are large caps. The process also leads the team to invest in higher quality companies. The bottom up focus results in a fund that is dramatically different than the benchmark.
One of the biggest drawbacks to this fund is it is extremely expensive. It had a management fee of 2.50% and fixed costs of 0.22%, bringing the total MER to 3.07% after all taxes. Fortunately, National has recognized this to be an issue and has cut both the management fee and administration fees. The new management fee is 2.30% and the admin fees are 0.19%, bringing the MER to an estimated 2.84%. It’s still pricey, but more in line with some of its peers.
I will continue to watch this fund, but am not ready to jump on the bandwagon yet. Recent performance has been strong, and I will look for a continuation of this trend. Stay tuned…