This is a concentrated, all-cap, Canadian-focused equity fund. It is
managed using a disciplined, team-based approach that looks to find
Canadian companies that are trading below what Brandes believes they are
worth. The portfolio holds only around 25 equity names. It can invest up to
49% outside Canada, and gets that exposure by investing in the
Brandes Global Equity Fund.
The investment process is very much a fundamentally-driven, bottom-up one
that starts with the
Brandes team of Ralph Birchmeier, Yingbin Chen, Mark Costa, and Luiz Sauerbronn looking
for well-managed companies trading at deep discounts. Once they find an
idea, a detailed analysis is undertaken, where they look to gain a full
understanding of the business. After an idea is thoroughly researched, it
is presented to the Investment Committee, which decides if it can be added
to the portfolio. The weight of a stock is the function of its margin of
safety and risks. The result is a portfolio that is much different from the
index. It is also a portfolio that tends to have more attractive valuation
metrics than either its index or peer group.
Top holdings as of July 31 included the Brandes Global Equity Fund,
Corby Spirit & Wine Limited (TSX: CSW.B),
E-L Financial Corp. Ltd. (TSX: ELF),
Dorel Industries Ltd. (TSX: DII.B), and
Fairfax Financial Holdings Ltd. (TSX: FFH).
While performance has been above average, volatility – particularly
shorter-term volatility – has been much lower than the peers or the index.
Longer-term, however, volatility has been significantly higher, and given
the disciplined, value style, I would expect to see volatility increase in
the future. Still, I believe the fund has the potential to deliver
above-average risk-adjusted returns.
I like this fund, because of its team-based approach, disciplined process,
and attractive valuation metrics. The potential volatility levels, and
all-cap nature would prevent me from recommending it as a core holding for
anyone who may be risk averse. Instead, I see this as a positive
contributor when included in a well-diversified portfolio.
The biggest drawback is its high cost, with an MER of 2.72%. But for those
with an above-average appetite for risk, this is a fund to consider.
Bridgehouse Asset Managers
Canadian Focused Equity
FundGrade Rating: A (July)
FundGrade A+ Award:
All Cap Value
Brandes Management Team
BIP121 (front-end load)
Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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only and is not intended as personalized investment advice.