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This all-cap fund focuses on Canadian businesses. Excellent performance since inception in 2009 with low volatility, high alpha, and high Sharpe. Portfolio focus is real estate and energy. OK expense ratio after waivers through early 2013. A no load, no fee offering at Schwab. The portfolio managers are Oscar Belaiche and Jason Gibbs. Mr. Belaiche is senior member, and he has been with the Fund's subadvisor, GCIC US Ltd., since inception. GCIC is a subsidiary of DundeeWealth Inc., specifically for its Dynamic Funds line-up. DundeeWealth is owned by The Bank of Nova Scotia.
Here is link to Fund's website:
Performance Summary (from Morningstar): DWGIX has outperformed Canadian S&P and Foreign Large Blend indices, with a 19% annualized return, and it has done so with a smooth ride. It is up 8.4% YTD.
Investment Strategy (from Fund prospectus): The Fund invests, under normal market conditions, at least 80% of its assets in the equity securities of companies located in Canada. The Fund invests primarily in dividend or distribution paying Canadian equity securities and real estate investment trusts (“REITs”), as well as in other types of Canadian equity securities, including limited partnerships. In addition to its Canadian equity investments, the Fund may also invest in other foreign and U.S. companies of any size, including small and mid capitalization companies, as well as in U.S. While the Fund will not concentrate its investments in any one industry, the Fund will focus on equity securities in the energy, real estate and infrastructure sectors.
The Fund evaluates an equity security’s potential for capital appreciation, employing a Quality at a Reasonable Price (QUARPTM) philosophy and uses strict fundamental analysis and due diligence measures to assess potential investments. In conducting fundamental analysis of companies that are being considered for purchase in the Fund, the management team evaluates the financial condition and management of a company, its industry and the overall economy. The team may 1) analyze financial data and other information sources, 2) assess the quality of management, and 3) conduct company interviews, where possible.
The Fund invests in businesses with sustainable cash flow distributions, dominant positions in their respective industry sector, and management that holds a significant equity stake.
Bottom-line: DWGIX currently enjoys a 5-Star Rating at Morningstar. The Fund's size is small compared to most other DundeeWealth Dynamic Funds offerings with only $4.2M in assets. Suspect it will not stay small for long, as it is hard not to be attracted to this fund.
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Comments
http://www.dynamic.ca/eng/aboutus/Who-We-Are.asp
Since 2001, Mr. Belaiche has been the portfolio manager of a very similar fund to DWGIX at Dynamic Funds called Dynamic Equity Income Fund. It too enjoys a 5-Star Rating at Morningstar Canada. Its size is substantially larger at $1.7B. Here is link:
http://quote.morningstar.ca/QuickTakes/fund/f_ca.aspx?t=F0CAN05NIG®ion=CAN&culture=en-CA.
Today, Mr. Belaiche managers more than $20B. The following report on him from 2005 gives a bit more insight, perhaps, than the standard profile:
http://www.morningstar.ca/globalhome/industry/ManagerMonitor.asp?reportid=276644
Why the switch to quarterly distributions, and why have they shrunk?
To take the second question first: the transition to quarterly distributions was this year, and the capital gains are still distributed only annually. So there haven't yet been any capital gains distributions made since the transition to compare with prior distributions. The size of the income distributions seems in line with the older ones (which were just annual), i.e. 16c for half a year, vs. 0-30c per year in the previous three years.
As to the first question, aye, there's the rub. This is a completely different fund than it was last year. Last year (through Sept. 30th), it was Dynamic Infrastructure Fund. You will notice no Canada in its name, and in fact its March 31, 2011 Semiannual statement shows only 25.3% investment in Canada (that's less than it had invested in the US). And despite the fund's fact sheet saying that it was formerly benchmarked against the S&P/TSX Global Infrastructure Index (implying some connection with Canada), the benchmark index has no TSX in it, and the prospectus compared its performance to "Standard and Poor's Global Infrastructure Index" (no TSX).
The fund was changed to an equity income fund, thus the change to quarterly distributions. Why the fund made the change? Who the heck knows? Here's everything the fund wrote about the reasons to the shareholder in the proxy statementEmphasis in original. So why did the fund change completely? Because, for some unstated reason, it was in the "best interests of the shareholders."
I would take a much closer look at what's going on here - what the fund held, what it holds, how meaningful any figures are, and the transparency of the management before jumping in to this.
As to the fund's classification - there's a basic problem classifying single country funds when there are only a couple of funds that focus on that single country. Not a specific M* problem. But since this fund was a global/international fund for most of its existence (until under a year ago), the classification would appear to be correct in any case.
For DWGIX proper, Schwab imposes a $10K minimum investment - but it is a OneSource, No Load, No Fee Fund.
(DWGIX > index ~= FICDX).
The questions are: whether its performance will continue (especially since its prospectus says that it will concentrate in three areas - energy, real estate, and infrastructure - as opposed to being a broader Canadian fund with more flexibility), and whether it may change its objective again.
These aren't criticisms so much as statements that there are more unknowns to consider.
It bothers me that I can not find how much Oscar Belaiche and Jason Gibbs have personally invested in this fund, if any thing.
It bothers me that I don't know exactly where the buck stops in the advisory chain, even if that is the way some of this industry is going these days (eg., recent purchase of Yackman). Is it DundeeWealth, or GCIC (what does that stand for anyway), or Dynamic, or Bank of Nova Scotia?
It bothers me that the fee could increase after January 2013 to the levels presumably seen by the legacy Dynamic Equity and Income Fund to 1.75% or 2.15% or higher.
It bothers me that Dynamic has five Series Types, all with varying degrees of load/fee, for the legacy Dynamic Equity and Income Fund.
It bothers me that Oscar Belaiche shows up on 14 funds as manager or co-manager at Dynamic.
(Although, for the record, it does not bother me that the DWGIX's focus is energy and real estate, currently.)
And yet, for all these flags...
I challenge this forum to point out other funds that have produced so much with so little volatility.
DWGIX for last three years: Annual Return of 14.52% with Standard Deviation of only 10.17%.
Legacy Dynamic Equity and Income Fund for last ten years: Annual Return of 11.53% with Standard Deviation of only 12.40% . In fact, since 2002, it only lost money one calendar year, 2008 of course, but only 24.60%...impressive for that tough year, as we all know.
Again, whatever the recipe, whatever the flags, that's an impressive performance this past decade.
Trust we will continue the healthy debate.
- Regarding fees, it should bother you not only that the expenses could rise, but that there's a claw back provision, where the fund expenses could be high not only because that's what the fund costs, but because the fund is reclaiming expenses that it waived the prior three years (this is not uncommon, but something that's significant if the AUM is not rising quickly)
- Many share classes is quite common for funds sold in Canada; not something I'd worry about
- I see several question marks with the supposed sector concentrations:
-- The fund says it made a complete change in direction - it supposedly was a global fund, now it's a Canadian fund; it was an infrastructure fund, now it's a "broader" Equity Income fund.
-- The prospectus says that it will now focus in just three areas (energy, real estate, infrastructure); how much of its performance (past, based on infrastructure), or current (adding energy and real estate, still a narrow focus) is because of that charter and tailwinds?
-- How honest is this declaration of focus (energy, real estate, infrastructure)? First, we have the hidden double-counting of energy (S&P defines infrastructure as energy, utilities, and transportation). Second, we have the fact that as of its last semi-annual report (March 31), it was 24% into financials; financials falling within neither its old nor its new prospectus charter.
In this era of online data, it's easy to find anything that exists. While I question the meaningfulness of finding a fund that has better performance and lower volatility for a given period, here are a couple of answers:
- Legacy Dynamic Equity and Income Fund (a fund offered for sale in Canada) has a 10 year record of 11.61% (through Aug 7) and std dev of 12.40 (through July 31); the latter is above the average for its category (Canadian Dividend/Income Equity). It is surpassed by Sentry Canadian Income with 13.41% and 11.96 respectively. Also a Canadian Div/Income Fund.
- DWGIX's 3 year figures are 14.44% (through Aug 7) and 10.17 (through July 31). There are of course lots of bond funds that can beat these figures. Also Cook & Bynum (COBYX), at 14.90% and 9.05 respectively. A generic US large cap value fund. There are also real estate and utility funds - exactly the sectors that DWGIX is supposed to now and always focus on (thus reinforcing the question about how much of its good numbers come from a tailwind that could shift).