We have replaced CI Canadian Investment Fund with Fidelity True North Fund on our recommended list of the top five Canadian equity funds.
When we find an equity mutual fund that we believe is superior to one of the funds on our recommended list, we’ll add it to the list and drop the weaker fund from it. We welcome Fidelity True North Fund Series B (Fund code: FID225 (FE)) to our list of the top five Canadian equity funds. It replaces CI Canadian Investment Fund (Fund codes: CIG7420 (FE), CIG7425 (DSC), CIG1425 (LL)), which we’ve kept on our larger Top-40 list of funds to own (see below).
Fidelity True North aims to achieve long-term capital growth by investing primarily in Canadian stocks. The fund follows a blended growth/value investment approach. When buying and selling stocks, its portfolio manager, Maxime Lemieux, examines each company’s potential for success in light of its current financial condition, its industry position and economic and market conditions. He considers factors like growth potential, earnings estimates and quality of management.
One reason why we prefer Fidelity True North over CI Canadian is that it’s a consistently stronger performer. These past 10 years, the Fidelity fund has returned a compound annual 5.0 per cent, to rank in the top quartile of the Canadian equity fund category. And the fund also ranks in the top quartile of the category for each of the past one-, three- and five-year periods.
On a year-by-year basis, the fund performed in the top half of the category in seven of the 10 years ended Dec. 31, 2015. Under Mr. Lemieux, who joined the fund in late 2009, it has performed in the top half of the category in five of the six years ended Dec. 31, 2015.
While Fidelity True North has delivered consistently stronger returns than CI Canadian has, it has done so while incurring less volatility. Both funds, though, are less volatile than their benchmark indexes and their category averages.
Another factor that commends Fidelity True North over CI Canadian Investment is its slightly lower management expense ratio (MER). Fidelity’s MER is 2.29 per cent, while CI’s is 2.38 per cent.
Fidelity True North’s portfolio is conservative. The fund currently holds 78.0 per cent in Canadian equities, 8.4 per cent in foreign equities and 13.6 per cent in cash.
No single industry sector accounts for much more than 20 per cent of the fund’s assets. Top holdings include TD Bank, Loblaw, Canadian National Railway, Rogers Communication and Manulife Financial.
Fidelity True North is a buy if you’re looking for a very conservative, diversified Canadian equity fund.
CI Canadian Investment Fund is a top 40 Canadian fund
Though we’ve removed CI Canadian Investment Fund from our recommended list, we still recommend this fund as part of our Top-40 list of funds that we periodically publish.
The fund has been a decent, if unspectacular, long-term performer. Its 10-year 3.0-per-cent compound annual growth rate to the end of January is a second-quartile performance in the category of Canadian focused equity funds.
The problem is the fund’s performance has lagged in more recent periods. In each of the past one-, three- and five-year periods, the fund performed in the third quartile of the category. On a year-by-year basis, it performed in the top half of the category in just five of the 10 years ended Dec. 31, 2015.
For most of the past 10 years, the fund has been managed by Daniel Bubis of Tetrem Capital Management. Mr. Bubis has had a strong track record as a fund manager. Before founding Tetrem in 2004, he directed all investment management operations at Assante Wealth Management Ltd., whose funds were among Canada’s top performers during his tenure. Tetrem assumed management of CI Canadian Investment Fund in 2006, and performance in the initial years was strong. We suspect the firm’s value-oriented investment style will return to favor in time. Buy.
Money Reporter, MPL Communications Inc.
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