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Two Vancouver fund shops make their mark with FundGrade A+ Ratings
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The Fundata Analytics Team puts a FundGrade® “A-list” fund under the microscope.

By Fundata Analytics Team  | Tuesday, February 05, 2013

While Toronto likes to hog the limelight as Canada’s financial centre, never let it be said that Vancouver can’t compete. In fact, two Vancouver-based funds were acknowledged as among the best of the best in the West, winning the annual Fundata FundGrade® A+ Rating™ for mutual funds in 2012.

The annual FundGrade A+ Rating builds on the already popular FundGrade rating system by singling out funds that have been able to keep a consistently high FundGrade throughout the calendar year. Two high-performing Vancouver-based mutual funds demonstrated what it takes to be considered right up there with the best of the best in 2012.

Pender Small Cap Opportunities Fund

This offering from Vancouver, BC-based PenderFund Capital Management had a banner year in 2012. It posted a calendar year return of 31.3% compared with -0.5% for its benchmark, the S&P/TSX Capped Composite Total Return Index. And it achieved Fundata FundGrade A status for 11 out of 12 months in 2012. So it’s easy to see why this fund earned a FundGrade A+ award for 2012. Residing in the Canadian Small/Mid Cap Equity category, the fund’s impressive calendar year return ranked second amongst its peers group, which posted an average return of 5.7% for the year.

Managed out of Vancouver by fund manager by David Barr, who is also Pender’s Chief Investment Officer, the fund takes a “value-investing approach to building a concentrated portfolio of well-managed, small-cap businesses, with strong competitive positions, which are overlooked by the market and have the potential for significant capital appreciation.” To achieve this goal, Mr. Barr has put together a relatively small portfolio of 35 holdings, with the top 10 comprising over 40% of the portfolio. Some of the top names include Absolute Software Corp. (TSX: ABT), a security management software provider, Redline Communications Group Inc. (TSX: RDL), a holdings company with several subsidiaries in the communications industry, and QHR Technologies Inc. (TSXV: QHR), a healthcare technologies supplier.

The risk metrics suggest that this Pender fund assumes a relatively small amount of risk to achieve its impressive returns. Its 3-year annualized standard deviation is 13.0%, which ranks it 15 in a group of about 50, while the average for the Canadian Small/Mid Cap category is 15.0%. The combination of high returns and low standard deviation yields an impressive Sharpe ratio of 1.35, third-best in the category. The Prospectus Risk Rating is “High,” as it is with most small-cap funds.

Steadyhand Equity Fund

Offered by Vancouver, BC-based Steadyhand Mutual Funds Inc., this fund was launched in February 2007. After a rough couple of years, which included the crash of 2008, the fund has become one of the top-performing and most consistent funds in the Canadian Focused Equity space.

In 2011, a horrible year for equities across the board, the Steadyhand Equity Fund limited its decline to -1.3%, while its peers lost an average of -9.6%. In 2012, the trend continued as the fund gained 15.6%, one of the highest calendar returns in the category. Remarkably, this outperformance has come with lower-than-average volatility. This outstanding risk-adjusted performance helped earn the fund a Fundata FundGrade A+ Rating for 2012.

Looking at longer-term performance, on a 3-year average annual compound return basis, the fund earned 8.3%, significantly outperforming the Canadian Focused Equity category average of 2.4%. It achieved this while limiting volatility to a standard deviation (SD) of just 10.0%, much lower than the 11.6% category average.

Looking at the 5-year performance, the Steadyhand Equity Fund was one of only a few funds that did not lose money in the period. It managed to post an average annual compound rate of return of 1.6% during this time, despite dropping over 27% in 2008.

The fund is managed for Steadyhand by Ted Ecclestone of CGOV Asset Management. With a mandate to invest in companies of all sizes, the manager looks for profitable, well managed businesses with a sustainable competitive advantage. The portfolio is very concentrated, holding only around 20 to 25 names at any given time. The majority of the fund is invested in Canadian equities with the remainder made up of US and Foreign equities. Top holdings as of December 31, 2012, included Suncor Energy Inc. (TSX: SU)Toronto-Dominion Bank (TSX: TD), and Starbucks Corp. (NASDAQ: SBUX).

This is a no-load fund and has very reasonable MER of just 1.35% in a category where the average is around 2.4%. If you do not mind the minimum $10,000 investment, this Steadyhand fund is an inexpensive option for those looking for a core equity fund with a top-notch manager.

Reid Baker is Manager, Analytics & Data at Fundata Canada Inc., a leading source for investment fund information. He is Chairman of the Canadian Investment Funds Standards Committee (CIFSC).

Brian Bridger, CFA, FRM, is Director, Analytics & Data at Fundata Canada Inc. and is a member of the Canadian Investment Funds Standards Committee.

Notes and Disclaimers

© 2013 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. However, please call the author to discuss your particular circumstances.

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