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Analysis: After a very strong 2009 and 2010, small cap stocks struggled through 2011 giving back some of the gains of the previous two years. The AGF Canadian Small Cap Fund was no exception, losing 14.7%, for the year, which was slightly worse than the BMO Small Cap Index.
The Fund has been managed by Caterina Preto since April 2008. Ms. Preto uses a bottom up, growth focused process. She takes a very patient approach and typically sets an expected holding period on each stock of between three and five years. The portfolio tends to be fairly well diversified holding around 100 individual names with the top ten making up 35% of the fund.
Performance has been middle of the pack and has lagged the benchmark and the peer group in virtually all time periods. The volatility of the fund is in line with the category average, but is higher than the broader S&P/TSX Composite Index.
The Fund has an MER of 2.81%, which is higher than the category average. This high MER has the potential to drag the overall performance of the fund in sideways and volatile markets.
The manager expects that the market environment for Canadian equities will remain elevated. She is viewing this as an opportunity to selectively add attractive names into the portfolio. Nearly 46% of the fund is invested in energy and materials.
Looking forward, we would expect that the performance of this fund will remain in the middle of the pack. We have not seen anything which causes us to believe that performance will dramatically improve anytime soon.