With a top quartile gain of 5.25%, the fund continues to deliver above average returns, with lower than average volatility. The managers use a fundamentally driven, bottom up investment process that looks for high quality businesses, run by strong management teams that are trading at attractive valuations.
Because the managers pay very little attention to the benchmark, it looks nothing like it. It is significantly underweight in materials, which created a bit of a headwind in the first quarter, as gold and silver shot significantly higher. It is overweight in consumer focused names, with a modest overweight in energy and industrials.
Valuation is key to the management team, and that is reflected by the portfolio which is trading at significantly lower multiples than the benchmark or its peer group. They also tend to favour companies that offer not only a dividend, but the ability to maintain and grow that dividend over time. The portfolio yield is 2.9%.
Looking ahead, the managers believe we are in a low return environment and have continued to place an emphasis on capital preservation. Volatility has historically been lower than the benchmark and peers, and downside protection has been excellent.
I believe this to be one of the best small cap funds available to investors. If you’re looking for a fund that will shoot the lights out, you might want to keep looking. But, if you’re looking for a well-managed, high quality fund that has the potential to deliver above average returns and below average volatility over the long-term, this is definitely one to consider.