There’s seldom a compelling reason to recommend a fund that’s been operating for less than about three years. That’s because new funds often involve unknown management, have no portfolio and no history of performance. We have the prospectus to show what the fund intends to do, but no evidence of what it will actually be able to do, or how its manager will go at it. But here’s a new small cap emerging markets mutual fund that offers excellent prospects.
RBC Global Asset Management started the RBC Emerging Markets Small-Cap Equity Fund (Fund code: RBF485 (NL)) less than two years ago. The fund’s objective is to provide long-term capital growth by investing primarily in small-capitalization companies located or active in emerging markets.
This small cap mutual fund’s investment process is mostly based on fundamental research, although the portfolio manager will also consider quantitative and technical factors. Stock selection decisions are ultimately based on an understanding of the company, its business and its outlook.
What we like about this fund is its manager, Philippe Langham. He’s the head of Emerging Markets Equities and a senior portfolio manager at RBC. He’s worked in the investment industry since 1992 and in 2009 he joined RBC Asset Management to establish and lead the team that manages RBC Emerging Markets Equity Fund.
Among the best emerging markets funds
Mr. Langham has done a remarkable job with this fund. RBC Emerging Markets Equity was started in April 2010. Since then, the fund’s compound annual growth rate is 8.4 per cent. Over the past four years, the fund boasts an annualized return of 8.3 per cent, which ranks in the top quartile of the emerging markets equity category. It’s also above the return of the Dow Jones Emerging Markets Total Return Index (C$), which posted 5.5 per cent over the same time.
Over the past one- and three-year periods, the fund has continued to perform in the top quartile. This past year, it gained 29.8 per cent to rank third of 76 funds in the category.
The fund’s performance has been consistently strong. In each of the past four years, it was a top-quartile performer.
Mr. Langham has produced similar early results with the newer RBC Emerging Markets Small-Cap Equity Fund. Started in August 2013, the fund has delivered an annualized 18.8 per cent since inception. And this past year, the fund has returned 28.0 per cent to rank in the top quartile of all emerging markets funds. We think the fund offers a highly exciting vehicle through which to obtain exposure to markets which, in our view, should deliver above-average returns over the long term.
RBC Emerging Markets Small-Cap Equity is a buy if you want the potential for strong growth and can accept high risk.
Canadian Mutual Fund Adviser, MPL Communications Inc.
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Canadian Mutual Fund Adviser •3/25/15 •