Great funds you could miss

Although professionals have tremendous respect for the company, many investors have never heard of Beutel Goodman. Of those who have, only a small percentage of them actually own any B-G funds.

Too bad for you if you don’t! Anyone interested in value-oriented, low-risk funds should take a close look at the dozen offerings from this low-profile house.

Beutel Goodman is a big name in institutional money management, running pension fund money, pooled funds, and accounts for high net worth investors. In 1991, the company decided to get into the mutual funds business with a small line of specialty products.

Not every fund in the group is a blockbuster, but most are worthy candidates for a conservative portfolio. Of the nine funds with a three-year record that I recently reviewed, three received my top $$$$ rating, including the Beutel Goodman Small Cap Fund which I recommend to our readers in October 2003. Four others were a notch behind at $$$.

The minimum initial investment is a barrier for some people at $10,000. But here’s a tip: if you have a fee-based account, you can buy the “F” units for an initial investment of just $1,000. Check with youadvisor.

Here are capsule reviews of the three Beutel Goodman funds that I regard as the best buys at this time.

Beutel Goodman Canadian Equity Fund. This is a classic buy-and-hold fund that is a pure Canadian equity entry – no foreign stocks at all. The portfolio consists of 35-45 high-quality securities like Manulife Financial, TD Bank, and BCE. The manager’s target is value companies that are generating substantial free cash flow, earning their cost of capital, and growing their business over time. The strategy is working very well, thank you. In the year ending Feb. 28, the fund returned 11.2 per cent. Over the past decade, this is one of the few Canadian stock funds to show an annual double-digit gain, with an average annual compound rate of return of 10.6 per cent. The fund has relatively low volatility as measured by both its low standard deviation (3.07) and low beta (0.85). This fund’s very good risk/return profile and its well-designed and transparent investment strategy warrant a $$$$ rating.

Beutel Goodman Money Market Fund. Since inception, this fine money market fund has batted a thousand. It’s beaten the average in every year since 1991. This top-quartile performer is conservatively managed, mixing government T-bills with higher-yielding short-term corporate debt, all with a maturity of under one year. The volatility is below average as well. I recommend it for temporary cash as well as for your RRSP. This is one of my favourite money market funds. Rating: $$$$

Beutel Goodman Small Cap Fund. This is a premier small-cap fund if you want a good risk/reward trade-off. The fund holds a well-diversified portfolio of stocks (generally between 30 and 50), with an adjusted market float of between $100 million and $1 billion at time of purchase. It has managed to beat the average fund in its category the majority of the time, making this a top selection among small-cap funds. In the year to Feb. 28, it had a below-average gain of 9 per cent but over longer time frames it is a first or second-quartile performer. Over the past 10 years, the fund’s 17.9 per cent average annual return is third-best in the Canadian Small Capitalization category. For a small-cap fund, this one is rather conservative, with a sprinkling of income trusts in the mix. Overall, you’ll find a good blend of growth and value here, along with below-average risk (in relation to small-cap funds generally) and good returns. Rating: $$$$

Be sure to consult your financial advisor before making any decision on buying units in these funds for your account.