Just three months into 2013 and certain funds are already starting to separate themselves from the pack by posting very solid numbers. This time, we look at two Fundata FundGrade® "A" Grade funds that could be on pace to earn the FundGrade A+ Rating™ for 2013 if they can keep up the momentum. The Excel EM High Income Fund and the Beutel Goodman American Equity Fund are both off to a strong start for 2013.
Excel EM High Income Fund
For Excel EM High Income Fund, this is first year of eligibility for the FundGrade A+ Rating.
The fund is managed by sub-advisor Amundi Capital Management. Manager Sergei Strigo searches for higher bond yields in emerging markets. Emerging markets bonds usually pay higher yields than bonds issued by local or developed companies or governments because of the lower credit ratings and higher risk of default. Funds that hold primarily non-investment-grade fixed income, or hold more than 25% of the portfolio in high-yield fixed income, end up in the High Yield Fixed Income category. So almost by default, funds that invest in emerging markets fixed income will end up in this category.
There are over 60 main series funds in the High Yield Fixed Income category and nine of them that focus on emerging markets. This Excel fund has outperformed the other eight over the past year to February 28, with a return of 15.1%, and a return of 10.6% over the past six months. These strong returns are enough to overcome a higher-than-average (3.2%) 1-year standard deviation of 3.9% and earn it the FundGrade “A” Grade rating. The Prospectus Risk Rating is listed as Low to Medium. The average 1-year standard deviation for Fundata’s Low to Medium Prospectus Risk Index is 4.4%, so the Excel fund compares favorably.
The fund seeks “to achieve total return comprised of a combination of interest income and capital growth by investing primarily in debt securities issued by governmental and corporate issuers located in emerging market countries throughout the world.” The portfolio consists of 55.5% foreign government bonds and 34.2% foreign corporate bonds. The European region is most heavily represented comprising about 46% of the portfolio. The MER is 2.41%, and minimum initial investment is $250. Sold through broker/dealers.
Beutel Goodman American Equity Fund
This FundGrade “A” Grade fund has been around a long time, but over the past few years, it has been steadily improving its risk-adjusted performance.
U.S. equities have been on quite a run recently. At the end of February, the S&P 500 Composite Index was up over 18% from its low in June of last year. Not surprisingly, U.S. Equity funds have been one of the best-performing categories, with an average 1 year return of 12.1% and an average year-to-date (YTD) return of 9.2%. The Beutel Goodman American Equity Fund is one of the top performers in the category.
The fund debuted in 1990 and is managed by Beutel Goodman & Co.’s Non-Domestic Equity Team, which includes Gavin Ivory and Glenn Fortin. They use a bottom-up, highly disciplined value investing approach with the objective to grow capital over the long term. They look for significantly undervalued equities, typically of industry-leading U.S. companies. The portfolio tends to be fairly concentrated, normally holding less than 30 positions. As of December 31, 2012, compared with the benchmark S&P 500, the fund was overweight Industrials and Consumer Goods & Services while being underweight Technology and Energy. Top holdings include JPMorgan Chase & Co. (NYSE: JPM), Halliburton Co. (NYSE: HAL), and TRW Automotive Holdings Corp. (NYSE: TRW).
As of February 28, 2013, the Beutel Goodman American Equity Fund has significantly outperformed its peers returning 20.2% in 1 year, and earnings an average annual compounded return of 21.1% over 3 years, 7.3% over 5 years, and 6.0% over 10 years. In addition, the fund also has lower-than-average volatility for the U.S. Equity category. These numbers back up the firm’s claim that the fund is a defensive play in volatile markets.
The fund is available with a front-end load, an F series, and a no-load option. The MER of the D series (FE) is 1.49%. The risk rating is Medium to High, and it requires a minimum investment of $5,000. Sold through broker/dealers.
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
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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.