What are we looking for?
The leaders among Canadian equity funds in the last year.
We ranked the top 15 performers in the category for the year to Feb. 28. U.S. dollar, segregated and duplicate versions of funds were excluded. We also left out funds with a minimum investment over $25,000 and those closed to new investors.
What did we find?
Some North American portfolio managers like the looks of the Canadian market, compared with the United States, and want to position their funds to capture advances.
One of those funds is the screen’s top performer, Redwood Equity Growth Class, which gained 46.3 per cent in the period.
While the fund is focused on picking individual stocks, portfolio manager Bruce Campbell said he’s mindful of the broadly stronger Canadian market, a trend he sees continuing for many more months.
“If we saw things go really in favour of the U.S., we could move money … but in a case like this where we see the relative strength flow back in favour of Canada, we’re happy to be 100 per cent Canadian-centric,” Mr. Campbell said. The Redwood Equity Growth Class fund is managed through his firm StoneCastle Investment Management Inc.
Some sectors have particularly benefited from the strength of the U.S. dollar, which has been a “wind at the back” of energy companies, Mr. Campbell says, as U.S. and foreign investors seek to invest more in the sector.
The Redwood fund has a 20-per-cent weighting in the energy sector, including its stake in junior exploration and production company Rock Energy Inc., which has seen strong gains in the time the fund has owned it.
Other top performing funds in the screen also have large portions of their portfolios invested in oil, gas and other energy stocks. The Omega Canadian Equity fund, which gained 29.1 per cent in the period, has 27.2 per cent of its portfolio allocated to the space.
But there are other businesses with accelerating earnings growth that have also caught the Redwood fund’s eye. Its investment in Concordia Healthcare Corp. has doubled so far this year. The fund invested in the company at the time of its initial public offering late last year.
All the funds in the screen beat the index by at least 10 percentage points, as the S&P/TSX composite climbed by 10.8 per cent in the year.