Fund in Focus: First Asset REIT Income Fund
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Objective research, analysis, and insight on investment funds in Canada from an acknowledged industry expert

By Dave Paterson  | Wednesday, June 27, 2018


Under the leadership of manager Lee Goldman of CI’s First Asset subsidiary, the First Asset REIT Income Fund has quietly delivered the strongest risk-adjusted returns of any real estate equity fund in Canada.

It invests in a mix of REITs and real estate operating companies, as well as in companies that are involved in real estate-related services. The fund’s focus is on Canada, but it can also invest up to 30% in foreign securities. At the end of May, it held 32 names, with the vast majority of those holdings in Canada.

Goldman and his team follow a disciplined value-focused investment process, looking for securities that are trading below what they are believed to be worth. As a result, valuation metrics of the portfolio are well below both the index and peer group.

With about only $35 million in assets, the fund can invest in smaller names and can quickly reposition to invest opportunistically. Most of the fund is allocated to mid- and small-cap companies, with only 4% currently allocated to large-cap names.

The strategy has delivered some decent performance, with a 5-year average annual compounded rate of return of 10.0% (to May 31), which is right in the middle of the Real Estate Equity category. However, the shorter-term numbers have been much better, with the fund delivering an annualized 10.3% over 3 years, handily outpacing the competition. Year-to-date to May 31 the fund has returned a solid 3.6%.

Most impressive is the fact that with a 3-year average standard deviation of 7.1%, the volatility of the fund has been substantially lower than its peer group. But this has been a bit of a double-edged sword. On one hand, the risk-adjusted numbers are excellent, and the downside protection has been stellar. On the other hand, performance is likely to lag the group when markets are rallying, as they did in 2014 and 2015.

Looking ahead, the fund remains focused on REITs with quality assets that have the potential to add value through development or intensification, that have exposure to high growth markets, and that have low payout and leverage ratios. The portfolio’s largest exposure is to the multi-family sector, which is often considered to be the least risky part of the market. All things considered, this is a very solid REIT offering.

First Asset REIT Income Fund
Fund company
: First Asset Investment Management
Fund type:
Real Estate Equity
FundGrade A+ Awards: 2013, 2016, 2017
Style: Mid Cap Blend
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Fair
Manager: Lee Goldman since June 2010
MER: 2.67%
Fund code: FAF5803 (Front-end load)
Minimum investment: $500

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 of 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.

Notes and Disclaimer

© 2018 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 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. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.


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