GBC International Growth Fund is well diversified by industry sector. It has exposure to most sectors of the global economy, and its greatest exposure to a single sector is just 23 per cent in the case of industrials. The fund invests in small- and mid-cap growth stocks of companies that are lesser known and early in their life cycle.
We’ve added GBC International Growth Fund (Fund code: GBC313(NL)) to our Mutual Fund Planning Guide. It replaces Templeton International Stock Fund, which we have removed from the Guide, and which we now recommend you sell (see below).
Before describing GBC International Growth Fund any further, you should know that an initial investment in the fund requires a substantial outlay. Offered by Pembroke Private Wealth Management, the GBC funds require a minimum initial investment of $100,000 if you deal directly with Pembroke. Note this amount can be divided up among different GBC funds and accounts with the firm. But if you go through a registered dealer, the initial purchase is a more manageable $10,000.
Assuming you have this amount, GBC International is a good fund to consider for your non-North American investments. Pembroke’s portfolios are characterized by growth stocks that are less known, early in their life-cycle, and positioned for long-term appreciation in the firm’s view. Pembroke also looks for companies with quality, entrepreneurial management teams who are significant shareholders in the businesses they run.
GBC International’s investment objective is to provide long-term growth by investing mostly in a diversified portfolio of small- to mid-sized foreign companies located outside the US.
Combining top-down and bottom-up analysis
Investment analysis for the fund is based on three levels of decisions. The first is to decide whether to underweight or overweight certain regions or countries of the world. The second is to determine the currency allocation of the fund. The third involves sector and security level analysis.
The objective of this three-level decision approach is to combine the benefits of top-down analysis with those of bottom-up security analysis. The approach, then, involves evaluating the financial condition and management of a company and its industry, as well as the health of the overall economy.
GBC International gives you good diversification outside of North America. The fund has considerable exposure to emerging markets, with 21 per cent of its assets invested in developing markets in the Americas, Asia, Europe and the Middle East. The portfolio also has substantial investments in developed markets in Europe, the Middle East and the UK, which together make up 50 per cent of assets. Other than that, it’s 20-per-cent invested in Japan and has just three per cent in cash.
GBC International is also well diversified by industry sector. It has exposure to most sectors of the global economy, and its greatest exposure to a single sector is just 23 per cent in the case of industrials.
Performance over the years has been generally excellent. The fund has been a top-quartile performer in each of the past three-, five-, 10- and 15-year periods.
The management expense ratio is an attractively low 1.88 per cent.
GBC International Growth is a buy for long-term growth from non-North American equities and you can accept medium to high investment risk.
Sell Templeton International
We’ve dropped Templeton International Stock Fund from our Top-40 list to make room for what we think is a stronger offering (see above).
Our general advice is to sell Templeton International and replace it with a similar, stronger offering if you want non-North American exposure. Attractive alternatives include GBC International Growth Fund if you want some small- to mid-cap exposure. More conservative investors should look at Mawer International Equity Fund.
Both funds offer attractively low management expense ratios, or MERs, compared with the Templeton offering. Templeton International’s MER is 2.59 per cent, GBC’s is 1.88 per cent and Mawer’s is 1.43 per cent.
Both the GBC and Mawer funds’ performance records are also superior to that of Templeton International. In fact, the Templeton fund has lagged the international equity mutual fund category average in each of the five years ended Dec. 31, 2016. And the fund has performed in the bottom quartile of the category so far this year. So while it has posted an attractive 10.9 per cent over the past year, we feel there are better choices among available funds.
This is an edited version of an article that was originally published for subscribers in the September 1, 2017, 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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