The best of the boutiques
Some of the smaller mutual fund companies offer the best values, both in terms of cost and performance. Unfortunately, since they don’t spend a lot of money on marketing they are often overlooked by investors.
Don’t make that mistake. Most of these companies require higher initial investments than the more popular fund line-ups, but if you have the money this is where you should begin your shopping. There are my choices for the top boutique fund houses in Canada.
ABC Funds. Irwin Michael’s small three-fund group has been beating the pants off most of the competition for years. His team uses a deep value approach to stock selection and the results are dramatic – all three funds have been first quartile performers in every year from 2001 to now. You’ll need $150,000 to get in, however. http://www.abcfunds.com
Beutel Goodman. It’s hard to find a bad fund in this small but impressive line-up. Beutel Goodman uses a value style of investing that protects capital while offering generally above average returns. Only the American Equity Fund has a losing record over three yrs. I especially like the Canadian Equity Fund, the Balanced Fund, and the Income Fund. Minimum initial investment is $10,000. http://www.beutel-can.com
Chou Funds. Manager Francis Chou has a record of outperforming in weak markets and underperforming in strong ones, but over the years his funds have produced very healthy returns with better-than-average risk.
I’m impressed with the debut of his two new entries, Chou Asia Fund and Chou Europe Fund. Chou Asia recorded a one-year gain of 10.8 per cent to Oct. 31 in the Asia and Pacific Rim category, well above the group average of -1.7 per cent. Chou Europe was up 4.3 per cent in the same period. Minimum initial investment is $10,000. http://www.choufunds.com
GBC Asset Management. This company does not actively prospect for new clients but if a growth style and small-cap stocks appeal to you, it is worth a look. The GBC Canadian Growth Fund has an excellent long-term record, with an average annual gain of more than 12 per cent over the past decade. The companion GBC Canadian Bond Fund makes a good low-risk partner to it.
A word of warning – because of the style, these funds can be more volatile at times than those offered by the more conservative value houses. Minimum investment is $100,000. http://www.gbc.ca
Leith Wheeler. Three of the top boutique houses are located in western Canada. This Vancouver-based money management company maintains a low profile (in fact, few investors have ever heard of it) but it is well worth your attention. The five funds in the group are all top performers with above-average returns over many years. The risk profile is well-suited to conservative investors.
The Canadian Equity Fund is particularly impressive with a five-year average annual compound rate of return of 13.3 per cent. It only had one down year during the bear market, a loss of 1.2 per cent in 2002. Minimum initial investment is $50,000. http://www.leithwheeler.com
Next page: Five more picks
Mawer Investment Management. This is another western company, based in Calgary. Most of their business is managing institutional money (pension plans, etc.) but they offer eight mutual funds that are open to investors with between $5,000 and $100,000 to invest (the minimum depends on a number of conditions). The company offers a U.S. and an international fund but its real strength is the Canadian products. Take a look at the Mawer New Canada Fund, a small-cap fund with a truly amazing track record. http://www.mawer.com
McLean Budden. Except for GBC, most of the boutique companies listed here use a value approach in selecting stocks. McLean Budden takes a different course. There is a value fund available, but the company’s long-term reputation has been built on what might best be described as a conservative growth style. Growth funds on the whole have not done well in recent years, but the cycle will inevitably change in their favour.
Meantime, the flagship McLean Budden Canadian Equity Growth Fund has been holding its own, with a five-year annual compound rate of return of 7 per cent, almost a percentage point better than the category average. The minimum investment is $10,000. http://www.mcleanbudden.com
Phillips, Hager & North. This Vancouver company has been a long-time favourite of mine. The greatest strength is in the fixed-income funds – you can’t go wrong with any of them. The Dividend Income Fund is also a must-have if you set up a portfolio with these folks. Steer clear of the international funds for now; the company has been struggling for years trying to get its act together in that area. Minimum investment is $25,000 per account. http://www.phn.com
Saxon Funds. There’s not a single lemon on this tree. Every one of the Saxon funds is a top-flight performer and the low MERs make this company even more attractive. It used to be difficult to acquire the funds if you lived outside Ontario but they are now available across Canada. If you can only choose one, make it the Saxon Stock Fund, which has gained an average of 13.5 per cent a year over the past decade. Minimum initial investment is $5,000. http://www.saxonfunds.com
Sprott Asset Management. The company announced recently that its flagship Sprott Canadian Equity Fund will reopen to new investors in January. That’s great news because this fund has a truly amazing track record: an average annual return of more than 40% over the past five years. The Sprott Gold and Precious Metals Fund is also a fine choice, if you think gold will continue to move higher. http://www.sprottassetmanagement.com
Talk to a financial advisor before making any decisions.