Seeking Synergy

It wasn’t so long ago that the Synergy funds were seen as the fastest-rising stars in the mutual fund firmament. Joe Canavan, who founded the company from scratch, combined his powerful marketing skills with a great money management team to create a portfolio of style-specific funds that ran rings around most of the competition.

Not surprisingly, investors flowed in and Synergy Asset Management became the fastest-growing member of the Investment Funds Institute of Canada. It looked like the sky was the limit.

But then, in mid-2003, Canavan and his partners decided that a take-over bid from CI Financial was an offer they couldn’t refuse. Synergy became part of CI’s expanding network, Canavan joined the firm as a senior executive, and the funds were folded into the hundreds of others already run by the company. The brand name remained but several of the original Synergy managers were cut loose and some of the funds merged out of existence. People lost sight of the funds and today they hold less than $3 billion in assets – about 5 per cent of the almost $56 billion that CI controls.

Just trying to find the performance record of t funds can be challenging. Globefund, for example, carries 686 listings for CI. The Synergy funds appear on the very last page; to reach them you have to scroll through more than 300 Sun Wise segregated funds, most of which are so tiny that they have no obvious reason to exist, almost 100 segregated Clarica funds, plus all the various CI, Harbour, and Signature funds. Even on CI’s own website, they’re buried way at the bottom of the mutual funds page, almost a footnote.

Well, I’m here to tell you that not only are the Synergy funds alive and kicking but they are well worth searching out. In fact, apart from a few notable exceptions like Harbour Fund and CI Canadian Investment Fund, they’re actually the best thing the company has going for it at present. Maybe they should get Canavan working on raising the Synergy profile again.

I recently did a detailed analysis of the Synergy funds and I liked what I found. All the funds receive at least a $$$ rating in my On-Line Buyer’s Guide to Mutual Funds. However, I did observe that the historical pattern shows that most of these funds outperform when stock markets are strong and underperform when they are weak. Keep that in mind if you’re considering adding any to your portfolio. With that caveat, here are two funds worth considering in the current investing climate. Talk to a financial advisor before making any buying decision.

Synergy Canadian Style Management Corporate Class. This fund gives you a bit of everything: value, growth, momentum, and small cap. The managers, David Picton and Kim Shannon, use a style-allocation process, adjusting the weightings of the four components periodically to reflect market conditions. The fund also has significant foreign exposure, with 11 per cent of assets in U.S. equities, about 5 per cent in Europe, and 3 per cent in Japan in the first half of 2006. This blended approach and Shannon’s conservative style makes the fund a little less risky than some of the other Synergy entries. One-year gain to April 30 was 24.7 per cent, about half a percentage point better than the average for the Canadian Equity category. The fund’s three-year average annual compound rate of return of 23.2 per cent was well above average. This is the Synergy fund to choose if you can’t decide which style you prefer. Rating: $$$.

Synergy Global Style Management Corporate Class. This fund offers style diversification for investors who are looking for a blend of stock selection approaches in a global fund. As with the Canadian equity version, you’ll find growth, momentum, small cap, and value styles all represented here – in effect, something for everyone. This one got off to a bad start with three straight losing years from 2000 to 2002. However, it is doing better these days, with a 12-month gain of 13.5 per cent to April 30 and a three-year average annual compound rate of return of 13.2 per cent. The U.S. is the big player here with almost 40 per cent of the assets. Japan is a distant second at 12.5 per cent. This is not a bad choice if you want a global fund that will handle the style mixing for you. Rating: $$$.

Adapted from an article that originally appeared in Mutual Funds Update, a monthly newsletter that provides advice on fund selection and strategies. For subscription information: