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Number Cruncher

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(Thinkstock Images/Getty Images/Comstock Images)


15 U.S. smaller cap equity funds that have outperformed Add to ...

What are we looking for?

Volatility has hit the U.S. markets with the government shutdown. Which U.S. equity funds focused on smaller-cap stocks have positioned themselves best in the last six months?

The screen

We screened funds in the U.S. small- to mid-cap equity funds for the six months ended Aug. 31. U.S.-dollar, segregated, pooled, duplicate version and accredited-investor funds were excluded. We also omitted funds closed to new investors and those with a minimum initial investment greater than $25,000.

These funds must invest at least 90 per cent of their equity holdings in U.S. securities.

What did we find?

Big returns for funds following a few carefully selected companies.

The top performer was AGF Aggressive U.S. Growth, with gains of 18.5 per cent in the six-month term. Tony Genua, the fund’s manager, has been with the fund for about as long – he took over in February this year – and said the portfolio has become more concentrated in the past few months, holding about 40 stocks today.

Mr. Genua likes companies that are innovators in their field. Right now he’s overweight in the technology and consumer discretionary sectors.

Most of the top performing funds in the screen outpaced the S&P 500 Index and nearly all posted double-digit gains.

Fidelity Small-Cap America-B also had solid gains of 16.1 per cent in the period.

The 40-stock portfolio has an uncharacteristically low turnover rate because Steve MacMillan, who manages the fund, looks for investments he can own for many years. Instead of watching near-term trends, quarterly earnings and moves in the market, he tends to think three to five years into the future.

Mr. MacMillan tries to meet with about 400 companies per year to make sure he’s buying the right businesses – only about seven will make the cut to be added to the portfolio.

But the portfolio manager is keeping an eye on the government shutdown in the U.S. and sees many parallels to August, 2011, when there were also concerns over the U.S. debt ceiling and fiscal policy. “If investors are waiting for a time when there’s no macro uncertainty, there’s also probably not a lot of opportunity,” he said.

But opportunity doesn’t mean a stock has to have a high beta. Mr. MacMillan says he will continue to look for companies with lower risk profiles.


U.S. small to mid-cap equity funds, six months to Aug. 31, 2013

Fund Symbol MER Assets
(in $ mil.)
AGF Aggressive U.S. Growth 2.66 198.0
Fidelity Small-Cap America-B 2.33 313.7
CIBC U.S. Small Companies 2.79 159.1
RBC U.S. Small-Cap Core Equity 2.17 82.5
Investors U.S. Small Cap Class-A 2.77 58.4
Standard Life US Mid Cap-A 2.55 2.4
TD U.S. Mid-Cap Growth Inv Series 2.55 559.7
Trimark US Small Companies Class Series A 2.93 79.2
CI American Small Companies 2.44 58.9
TD US Small-Cap Equity Inv Series 2.56 93.7

Source: Lipper


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