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There is really only a handful of active strategies worth considering in the U.S. equity category, and Mawer U.S. Equity Fund is certainly one to take a look at. Managers Grayson Witcher and Colin Wong look to build out a focused, yet diversified, portfolio of well-managed, wealth-creating companies that are trading at a discount to their long-term value. They’ve succeeded not only in delivering solid returns, but also managing the overall risk profile of the fund.
The fund’s 5-year average annual compounded rate of return to June 30 is 13.0%, compared with 12.2% for the S&P 500. Year-to-date, it’s up 2.2%, while the index is ahead 1.6%. The fund is also a multi-year FundGrade A+® Award winner, for outstanding performance in 2016, 2017, and 2018.
Volatility is slightly lower than the index and category, and the fund has delivered roughly 100% of the market return in a raging bull market, while participating in only 80% to 85% of the market’s downside. This all comes down to Mawer, its culture, investment process, and investment team.
Mawer’s strong corporate culture means investment style is unlikely to be flashy, and managers avoid taking big bets on any stock or sector. Another key to their success is the ability to look at portfolios using a realistic lens that weighs many different scenarios and outcomes, helping them adapt to changing market environments.
Their approach is long-term and patient, with a significant amount of research work at the front end on any position in the portfolio. This allows them to give holdings a bit of runway and management time to execute their strategy.
Changes to the portfolio are made for only three reasons: a better opportunity; an erosion in fundamentals; or a change in valuation. They use a very bottom-up approach and do not target specifically any industries or sectors.
Top holdings as of June 30 included Alphabet Inc., Marsh & McLennan Companies Inc., Visa Inc., Microsoft Corp., and Verisk Analytics Inc.
A couple of things the managers have recently been watching include valuation levels, which are deeply influenced by the current geopolitical environment. The COVID-19 pandemic and its impact on consumer activity and economic growth, Brexit (the haggling over trade and border issues continues, even though it’s a done deal), and the U.S.-China trade dispute all create uncertainty and friction, which has the potential to dial back corporate growth expectations.
I expect this fund to continue as one of the better U.S. equity funds. And I still expect the management discipline to allow for category-beating numbers.
Mawer U.S. Equity Fund
Fund company: Mawer Investment Management
Fund type: U.S. Equity
FundGrade: B (June)
FundGrade A+ Awards: 2016, 2017, 2018
Style: Bottom-up growth
Risk level: Medium
Load status: No load
RRSP/RRIF suitability: Excellent
Managers: Grayson Witcher since May 2009; Colin Wong since January 2016
MER: 1.14%
Fund code: MAW108 (No-load)
Minimum investment $5,000
Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.
Notes and Disclaimer
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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. Dave Paterson is employed as an advising representative (portfolio manager) by Empire Life Investments Inc. (ELII), a subsidiary of Empire Life Insurance Company. ELII is the investment fund manager and portfolio manager of the Empire Life Mutual Funds and the portfolio manager of the Empire Life Segregated Funds (collectively, the Empire Funds). As such, his employment and his compensation may be connected to the success of ELII and the Empire Funds. From time to time, the Empire Funds may buy, sell, hold, or otherwise have an interest in securities that may be discussed in this report.
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