|
Analysis: In managing this U.S. equity fund, Jim O’Shaughnessy uses a very quantitatively driven approach to stock selection. He has poured over decades of historical stock data to determine the factors which have, at least on a historic level, delivered excess returns to investors. He outlined his findings in his book What works on Wall Street. The key factors that are considered by the model include sufficient trading size, trading volume, growing sales and cash flows. Another metric considered is what O’Shaughnessy calls “shareholder yield” which is a combination of dividend payouts and stock repurchase programs.
The long term results of this fund have been strong on a relative basis, however it should be noted that the fund does hedge all of its currency exposure, which will help boost returns in periods of an appreciating Canadian dollar and will hurt returns when the dollar falls.
The fund uses a value screen in its stock selection process, but the volatility of this fund is considerably higher than one would experience with a traditional value fund. On a month to month basis, the volatility of this fund has been nearly double the volatility of the broader S&P 500 Index. The fund has also experience periods of significant drops. Between June 2007 and February 2009 the fund dropped by a mind blowing 61.8%.
The costs of this fund are reasonable, with an MER of 1.54%.
For investors who have a relatively short time horizon, this is a fund that should likely be avoided because of its higher volatility. However, for those looking for long term capital growth within the U.S. market, this may be a fund to consider.