You know the story about the hare and the tortoise? Meet the tortoise: fund manager Andrew McCreath.
Since taking over the Sentry Diversified Total Return fund two years ago, just after the 2008 market meltdown, he has been in no hurry to fully invest the mutual fund in stocks. His cash position averaged 40 per cent last year, but has been as high as 70 per cent twice.
"I am not looking to shoot the lights out," said Mr. McCreath of Toronto-based Sentry Investments. "The best way to make money is not to lose money."
His $351-million fund won a Lipper award in the Canadian-focused equity category for three-year performance to Oct. 31, 2010. The fund, which can invest up to 50 per cent in foreign stocks, posted an average annual return of 4.9 per cent, compared with a 1.7 per cent loss for the S&P/TSX Total Return Index.
Its mandate gives the manager flexibility to invest up to 100 per cent in cash and up to 30 per cent in bonds, and to short up to 20 per cent of assets. But he can't invest more than 15 per cent in small-cap stocks. His portfolio also tends to be diversified across sectors. "I am not a big bet guy," he said, noting that the biggest weighting now is in Apple Inc. at 4 per cent of assets.
Mr. McCreath, who has an MBA in economics from York University, joined Sentry after selling his hedge-fund firm, Waterfall Investments, to Sentry in 2008. His eclectic background includes being a portfolio manager and founding shareholder of fund company Synergy Asset Management Inc., which was acquired by CI Financial Corp. in 2003. Other highlights include being a sell-side stock analyst and even a rock band promoter.
The manager cut his fund's cash position to 25 per cent last fall after he became moderately bullish on North American stock markets because of improving U.S. economic data and the $1.5-trillion (U.S) in additional fiscal and monetary stimulus.
"I am positive on equities in the short term [few months]" but the cash component could easily go up again, he said. Mr. McCreath is still "generally cautious" about the stock market, considering risks such as Europe's debt problems and a weak U.S. housing market. "In North America, the jobs market has improved but it is not great," he said.
"The bottom line is that this [recent move into more equities]is a trade," said Mr. McCreath, who expects a single-digit return for the S&P/TSX Composite Index this year. "I think the market will be up in the first half, and down in the second half."