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After taking over Canoe Global Equity Fund from Fiera in October 2018, Canoe very wisely kept the management team headed up by Nadim Rizk, as Mr. Rizk had been successfully using the same investment process since 2006. The fund has been a perennial top performer in its category, and has been awarded the FundGrade A+ Award every year but one since 2014.
The managers look for best-of-breed companies with strong growth potential that are trading at reasonable valuations. They like well-managed companies with sustainable competitive advantages operating in industries with high barriers to entry.
The fund has an all-cap, go-anywhere mandate that relies on basic screens focusing on quality, valuation, and growth measures to help identify potential investment candidates. Managers conduct a detailed fundamental analysis focusing on both company and industry factors that help them determine their estimate of a company’s intrinsic value, screening further for companies with a potential minimum return of at least 50% over the next three years.
The investment process is benchmark-agnostic, and country and sector weights are a byproduct of the managers’ stock selection process. The result is a concentrated, yet diversified, portfolio that may hold up to 40 names. Of the current 21 names, the top 10 comprise 65% of asset value.
As of Jan. 31, top holdings included Moody’s Corp., Mastercard Inc., Nestlé SA, Keyence Corp., and Johnson & Johnson.
The fund is overweight financial services, healthcare, consumer staples, and information technology. It has no exposure to real estate, telecom, or energy.
The managers typically take a long-term view when analyzing a stock, so it is expected that portfolio turnover will be modest. For the past five years, turnover has averaged roughly 20%, which corresponds to an approximate holding period of about five years.
Performance has been excellent with a 5-year average annual compounded rate of return of 11.2% to Jan. 31, placing it firmly in the top quartile, and outpacing the 7.0% return for both the category average and MSCI World Index.
The fund’s volatility has been running slightly higher than the index and the peer group, at a 3-year average standard deviation of 10.4, but the better-than-average returns have more than offset this risk. Given that the fund has outperformed in both rising and falling markets, it remains one of my favourite global equity offerings.
Canoe Global Equity Fund
Fund company: Canoe Financial
Fund type: Global Equity
FundGrade: A
FundGrade A+ Awards: 2014, 2015, 2016, 2018, 2019
Style: Large-Cap Growth
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Good
Manager: Nadim Rizk since August 2010
MER: 2.39%
Fund code: GOC1041 (Front-end load)
Minimum Investment: $500
Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.
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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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