Mutual fund picks for 2004

If you’re considering trying mutual funds again, you may feel the old “once bitten, twice shy” syndrome.  Financial writer Gordon Pape and his co-author Eric Kirzner share three of funds they give their highest rating of four dollar signs, or close to it – and why.

Beutel Goodman Canadian Equity Fund ($$$$). This is a classic buy-and-hold fund with a strategy of investing in a small number of quality companies at any time, typically 18 or fewer. The fund manager’s target is deep value companies that are perceived to be trading at a large discount to net asset value and that are generating substantial free cash flow. So far the strategy is succeeding. In the year ending Sept. 30 the fund had a handsome gain of 20.2%, well above the category average. Over the past three years, the 6.9% average annual return beat the average by over 11 percentage points. Five and 10 year results are also well above average.

The fund has relatively low volatility as measured by its standard deviation and a very low beta. Manager Mark Thomson, who has been in charge since 1999, is doing a fine job. This fund’s very good return and risk numbers and itsell-designed and transparent investment strategy warrant an upgrade to a $$$$ rating. This fund is a very good choice for a low-risk investor and would work well in an RRSP.

If you live in Ontario, you can purchase Beutel Goodman funds on a no-load basis by ordering directly from the company. Call 1-800-461-4551 or 416-932-6400 for information. Elsewhere in Canada, you must purchase through an investment dealer and pay a sales commission of up to 4%. There is a minimum initial investment requirement of $10,000 on all Beutel Goodman funds.

Co-operators Canadian Conservative Focused Equity Fund ($$$$). Mutual fund buffs will remember this as the Associate Investors Fund, and it has a history of more than half a century under the management of the same house: Leon Frazer, Black and Associates. It has always been a solid, low-risk performer and its value style is especially well suited to the current investment climate.

The portfolio is very blue-chip oriented, with an emphasis on Old Economy stocks, such as Enbridge, Canadian Utilities, TransCanada Corp., and banks. The management team targets companies with good earnings, book values, and steady dividends—all key factors in selecting value stocks.

The fund held up very well in the bear market that opened this century. One-year gain to Sept. 30 was 13.9% and the three-year average annual compound rate of return was 5.7%, compared to a category average of -4.3%. All performance figures going back two decades are above average.

Not many people know about this fund, but it’s a worthwhile entry for conservative investors. The safety record is very good; the fund has only lost money in one year in recent times, a small 2% decline in 2001. That’s remarkable when you consider the market volatility we’ve experienced.

It used to be a no-load fund but it is now sold on an optional front- or back-end load basis through investment advisors. We raised the rating to $$$$ last year in recognition of more than a half-century of fine performance, and we’re maintaining it at that level again.
Note that there will likely be a name change in the near future. The Co-operators mutual funds are being sold to Industrial Alliance, with the closing expected soon. Let’s hope the new owners have the good sense not to fiddle with this one.

Burgeonvest Hirsch Opportunistic Canadian Fund ($$$).  This fund used to be run by a company called CEO. It has now been acquired by the Burgeonvest organization and renamed. However, veteran manager Veronika Hirsch remains in charge and she has entered into a 10-year agreement with Burgeonvest to continue to manage this fund and others that bear her name.

Hirsch uses an aggressive growth style and most funds that take this approach performed badly during the bear market. This is a notable exception. The fund gained 31.2% in the year to Sept. 30, more than double the average for the category. Over the past five years, the average annual compound rate of return was 11.9%, well above average.

Currently, the fund is skewed towards financial services, energy companies, and industrial products. Top 10 holdings include all the major banks, BCE, CoolBrands, and Brascan, giving the portfolio a decidedly blue-chip flavour. We’ve always respected Hirsch’s abilities as a money manager and they’re showing through again here.

Minimum initial investment is $1,000. The fund is sold through financial advisors on a front-end load basis only (maximum commission is 2%). For more information, call Burgeonvest at 1-888-317-3133 or go to

As always, consult with your financial advisor before making an investment decision.