AIM funds overlooked

AIM Trimark is Canada’s sixth-largest mutual fund company but as far as many investors are concerned the first part of the corporate name doesn’t exist. Trimark has high brand recognition, thanks to years of superior performance when it was an independent company. AIM? Who are they?

In reality, the AIM side of these corporate siblings offers some good-quality choices. In fact, in recent years some of the AIM funds have significantly outperformed their lagging Trimark counterparts.

I recently completed a full review of the AIM Trimark line-up and reported my Trimark findings here last month. So now let’s look at two of the best choices from the AIM side of the stable.

AIM Canadian First Class Fund. The AIM fund line-up doesn’t contain many funds that are well suited to risk-averse investors. As a general rule, AIM funds are more aggressively managed and growth oriented, while Trimark funds are more conservative and lean towards value. This fund is an exception and in fact would fit more comfortably under the Trimark brand.

The manager, San Francisco-based Glen Hilton, looks for stocks that are attractively prced in relation to historic earnings, cash flow, and valuations. He especially likes companies that offer a potential catalyst that could unlock hidden values. The style is highly disciplined; if a new stock is added, the weakest position currently in the portfolio is sold.

The largest single portfolio holding in spring 2006 was little-known Pan-Ocean Energy which turned out to be a hugely successful pick when the stock shot up in July after a take-over bid from Addax Petroleum, Nigeria’s leading independent oil producer. The deal made sense because Pan-Ocean’s assets are in nearby Gabon.

Although Pan-Ocean was a junior company, most of the major positions in the fund are familiar names, including several banks, Manulife, Tech Cominco, and CN Rail. The portfolio has a strong foreign content position although only 6.6 per cent of the assets are in U.S. securities.

Results have been very good, and the fund has been a consistent first- or second-quartile performer in every single calendar year since it was launched in 1997. In the year to June 30, it returned 17.9 per cent, well above the category average. The three-year average annual compound rate of return was 21 per cent, again well over the peer group norm. The fund’s performance during the bear market was also impressive with only a relatively small loss of 7.5 per cent in 2002 to mar an otherwise unblemished record. Volatility is about average for the Canadian Equity category. This fund continues to be an impressive performer and I am moving it up to a well-merited $$$$ rating.

Aim International Growth Class. This is a true international fund, with no more than 10 per cent of the assets in North America, and it’s one of the best. It is run by a team of four managers based in Houston who focus primarily on mid and large-cap stocks. The fund sustained losses in 2001 and 2002, which was par for the course in the bear market. Since then, it’s been a different story. The fund gained 16.1 per cent in the year to June 30 and the three-year average annual return of 17.6 per cent is significantly better than the average for the International Equity category.

The portfolio is well diversified, with the U.K. having the largest geographic weighting at 11.3 per cent followed by Japan at 8.4 per cent. The risk rating is slightly higher than average for the category but not be enough to be a concern. However, keep in mind that this is a growth-oriented fund and is therefore vulnerable in falling markets, as a recent decline confirms. The best strategy is use dollar-cost averaging or, if you are an active fund trader, to buy after a prolonged correction. Rating: $$$$.

Be sure to consult a financial advisor before making any investment decisions.

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: