Now a Top-40 Canadian Fund

We’ve added Fidelity Greater Canada Fund to our Top-40 list. It replaces CI Canadian Investment Fund, which we discuss.

Here’s our new Top-40 Canadian Fund

Fidelity Greater Canada

We’ve removed CI Canadian Investment Fund from our Mutual Fund Planning Guide. We recommend you sell the fund. We’ve replaced it with Fidelity Greater Canada Fund (Fund code: FID1246 (FE)), which we believe is a much superior offering to the CI fund.

Fidelity Greater Canada’s investment objective is to seek long-term capital growth by investing primarily in equity securities of Canadian companies, as well as foreign equity securities. To achieve this objective, the fund pursues a contrarian strategy that aims to identify value in out-of-favour stocks. In acquiring such stocks, its prospectus allows it to invest up to 49 per cent of its assets in foreign markets.

Fidelity Greater Canada’s Investment Approach

Greater Canada is a growth-oriented fund. It invests in shares of companies that trade at prices that reflect attractive valuation based on an assessment of each company’s growth potential. When buying and selling stocks, it may consider other factors about a company, including financial condition, industry position, economic and market conditions, earnings estimates and management quality.

The fund may also invest in companies of any size, though it is considered a large-cap fund. As well, it can invest in private companies and China’s A-shares, fixed-income securities and, of course, cash.

Excellent long-term performer

The fund has been an excellent long-term performer. Its compound annual growth rate of 13.1 per cent over the past 10 years ranks in the top quartile of the Canadian focused equity category. It has also performed in the top quartile in the past three- and five-year periods.

Over the past year, however, the fund was a bottom-quartile performer. This is probably due to its heavy weightings in the consumer discretionary and technology sectors, both of which have underperformed markets in Canada and the U.S. At the same time, it has virtually no exposure to energy, which has delivered positive results on both sides of the border.

On the positive side, the fund currently holds about 10.5 per cent of its assets in cash. This should help soften downside risk, while giving it the ability to buy in current markets if it so chooses. Then too, the portfolio has a considerable weighting in consumer staples stocks, which should further reduce downside risk.

Otherwise, the fund is well diversified by geography and industry sector. It currently has 51.4 per cent of its assets invested in Canada, 38.0 per cent in foreign equities, and the remainder in cash and other investments.

Investment breakdown

Its sector breakdown includes: consumer discretionary, 24.0 per cent; technology, 19.3 per cent; financials, 17.1 per cent; consumer staples, 11.9 per cent; industrials, 7.4 per cent; materials, 5.8 per cent; communications, 5.0 per cent; utilities, 3.4 per cent; health care, 2.3 per cent; and energy, 1.0 per cent.

Top holdings include Canadian Pacific Railway, diversified financial conglomerate Brookfield Asset Management and Dollarama.

The fund is slightly more volatile than its peers and its management expense ratio is 2.29 per cent.

Fidelity Greater Canada Fund is a buy if you want primarily growth, have a long-term investment horizon and can tolerate medium investment risk.

Downgrading CI Canadian Investment Fund

We’ve removed CI Canadian Investment Fund from our Top-40 list. This fund, which produced good results in decades past, has delivered lackluster results this past decade.

Mind you, it produced positive results over the past 10 years. But its 6.4-per-cent compound annual growth rate over this time lags its category average of 7.5 per cent. That places it in the fourth quartile of all Canadian focused equity funds. Indeed, it’s also a fourth-quartile performer in the past one-, three-, and five-years periods, too.

Looked at another way, the fund has performed in the top half of the category in just five of the past 10 calendar years.

This fund has undergone portfolio advisor shakeups in recent years. Tetrem Capital Management had managed the fund until that business closed and Harbour Advisors took over in 2017. Since then, Ryan Fitzgerald managed the fund until 2019. And the current management team has been in place just a few years. We currently view other funds in the space as more attractive.

This is an edited version of an article that was originally published for subscribers in the October 7, 2022 issue of Money Reporter. You can profit from the award-winning advice subscribers receive regularly in Money Reporter.

Money Reporter, MPL Communications Inc.
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