We include two of Mawer Investment Management’s mutual funds in our monthly Planning Guide. We feel Mawer’s equity funds rank among the more stable and best Canadian equity funds you can hold in your portfolio. What’s more, they offer significant savings on fees.
Mawer changes the makeup of its portfolios very little. The low rate of portfolio turnover, of course, reduces the expenses and improves the returns of the funds. Mawer’s top equity funds hold fairly high amounts of lower-risk financial services stocks. While that means the funds won’t necessarily show spectacular returns during market run-ups, it also means they tend to outperform during the inevitable market downturns.
Some investors may have avoided Mawer’s funds because they’ve heard a minimum total investment of $50,000 in the funds is required if you want to invest directly with the company. But in fact you can purchase the firm’s Series A units through a dealer with a minimum initial investment of $5,000.
In return for this sizable initial investment, you save on the fund’s management fees, which at around one per cent a year on the two funds we recommend ranks among the lowest in the mutual-fund industry. The funds also have very low management expense ratios, or MERs (management fees plus other variable expenses expressed as a percentage of the assets in the fund), averaging 1.32 per cent on the two covered in our Planning Guide. Mawer pays no commissions or fees to third parties recommending the funds. This, as well as the avoidance of some of the expense of dealing with small unit holders, lets Mawer keep its fees low.
Top quartile of best Canadian equity funds
The Mawer Canadian Equity Fund (Fund code: MAW106 (NL)), which we rate as very conservative in our Planning Guide, holds assets of $2.0 billion. Mawer invests about 36 per cent of the fund in financial services, with three of the five big banks accounting for approximately 13 per cent of assets. The portfolio, however, has no exposure to the utility sector.
While financial stocks provide Mawer Canadian Equity with stability, the fund has a below-market weighting in resources. Together the energy and materials sectors make up 18 per cent of the portfolio, compared to a more than 30-per-cent weighting for these sectors in the S&P/TSX Composite Index. The fund has typically not invested a lot of its assets in resources, while many of its peers have. This demonstrates Mawer’s ability to withstand following the crowd and maintain a disciplined approach to investing to produce superior long-term returns.
The emphasis on higher-quality stocks has let the fund produce a 10-year compound annual growth rate of 10.3 per cent, placing it in the top quartile of the equity category for best Canadian mutual funds performance. Similarly, the fund is a top-quartile performer in the past five- and three-year periods. And in the past year, the fund has gained 17.6 per cent, to rank seventh among 425 funds in the category. These figures demonstrate that Mawer Canadian is a consistently strong performer.
Portfolios built for different scenarios
Mawer says the outlook for Canadian equity markets remains heavily influenced by the outlook for commodities, energy and financial services. The firm sees weakness or tepid growth in most of these sectors over the next few quarters, so it’s cautious. But it believes its emphasis on wealth-creating companies has built resilience into its portfolios in the face of many different scenarios.
The Mawer International Equity Fund (Fund code: MAW102 (NL)), which we consider to be a conservative offering in our Planning Guide, holds assets of $3.2 billion. It has about 23 per cent of its assets in financial services, with utilities once again having no representation. Consumer stocks comprise 28 per cent, and industrial shares a further 13 per cent.
The fund’s emphasis on wealth-creating companies has produced a 10-year compound annual growth rate of 7.8 per cent, placing it in the top-quartile of the international equity category for best Canadian equity funds. The fund’s one-year rise of 19.0 per cent places it fifth among 303 funds in the category.
We think that if you’re looking for funds that rank high in long-term returns, and yet do it with relatively low volatility, then Mawer Canadian Equity and International Equity Funds are ideal. The no-load feature and low management fees make the funds even more attractive choices among the best Canadian funds.
Canadian Mutual Fund Adviser, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846