What are we looking for?
The Canadian stock market has fallen 4 per cent this year amid choppy markets. Given this volatile backdrop, let's see to what extent fund managers have been keeping their powder dry for future bargains.
We looked at the cash levels reported by fund companies in the first half of 2011 for Canadian equity, Canadian focused equity and Canadian dividend and income funds. (Note that some firms lag more than others in reporting holdings.) U.S. dollar, segregated and duplicate versions of funds were excluded.
What did we find?
NexGen Turtle Canadian Equity topped the list with a whopping 43 per cent in cash. That's nearly double the closest peer, Sentry Diversified Total Return, at 23.6 per cent.
NexGen's cash-heavy approach stems from manager Keith Graham's view that a "headwind environment" faces stock markets.
"The fiscal stimulus that was put into the financial system by the central banks really manifested itself in strong financial market performance," said the portfolio manager with Rondeau Capital Inc.
The imminent withdrawal of the U.S. Federal Reserve Bank's bond-purchasing program, also known as quantitative easing, appears to be playing out now in market volatility, said the veteran manager, who has also run money in the past for AGF Management Ltd. and what is now Invesco Trimark Ltd.
Mr. Graham, a value investor, said he can't find enough good companies at attractive prices in a Canadian market dominated by resource and financial stocks.
That's why the stock-picker, who launched his fund nearly a year ago, has increased his foreign holdings to about 20 per cent. They are mainly U.S. companies that get a big chunk of revenue from sales outside the country.
He owns defensive, health care names such as Abbott Laboratories and Medtronic, and telecom firms such as Rogers Communications and Manitoba Telecom. He had owned Research In Motion stock until recently, but sold that stock after the company slashed its sales outlook.
The manager also holds about 4 per cent in gold bullion through the SPDR Gold Shares, an exchange traded fund. "It's a hedge, a cash alternative and a stabilizer in the fund," he said.
His NexGen funds are aptly branded the "turtle funds," he said. "We are slow, steady and boring."
CANADIAN STOCK FUNDS WITH LOTS OF CASH
|Investment||Assets||Last reported||% of Cash in||YTD % rtn||Calendar year % rtn|
|Fund name||Category||MER||($-mil)||Holdings Date||Portfolio||(May 31)||2010||2009||2008||2007||2006||2005|
|NexGen Turtle Cdn Equity CG||Cdn. Focused Equity||2.85||16.3||5/31/2011||43.1||-3.3||n/a||-||-||-||-||-|
|Sentry Diversified Total Rtn||Cdn. Focused Equity||2.75||439.3||5/31/2011||23.6||-1.5||19.7||31.8||-22.4||2.2||18.8||-|
|Exemplar Canadian Focus Port Cl-A||Cdn. Equity||n/a||70.0||4/29/2011||22.9||0.2||21.9||15.8||-||-||-||-|
|Mackenzie Universal Cdn Value Class||Cdn. Focused Equity||2.44||219.2||5/31/2011||20.3||1.7||5.7||23.3||-27.6||-5.9||12.1||11.7|
|Fidelity Dividend-B||Cdn. Div. & Incm Equity||2.12||550.5||4/29/2011||16.2||5.3||11.8||32.5||-22.7||5.2||15.2||-|
|Mackenzie Ivy All Canadian Class||Cdn. Focused Equity||2.44||32.3||5/31/2011||14.9||3.6||14.1||4.1||-16.0||-4.6||7.0||6.5|
|Trimark Canadian Endeavour||Cdn. Focused Equity||2.15||824.2||5/31/2011||13.7||6.1||14.7||41.9||-36.6||-14.7||19.3||3.2|
|Stone & Co. Flagship Stock A||Cdn. Focused Equity||3.00||9.7||4/29/2011||13.4||9.2||3.0||21.8||-45.4||7.5||15.9||17.6|
|Fidelity Dividend Plus-B||Cdn. Div. & Incm Equity||2.12||189.6||4/29/2011||11.6||10.7||19.8||45.9||-22.1||5.4||13.7||-|
|Mackenzie Univ All Cdn Growth Class||Cdn. Focused Equity||2.45||31.6||5/31/2011||10.9||4.0||7.5||18.0||-19.2||7.1||11.4||8.2|
|CI Signature Select Canadian||Cdn. Focused Equity||2.43||2,928.0||5/31/2011||10.8||3.2||10.3||28.0||-26.0||3.0||21.0||22.9|
|National Bank Cdn Opportunities||Cdn. Focused Equity||2.31||227.2||4/29/2011||9.3||-0.8||13.2||38.0||-27.5||-1.7||13.4||9.4|
|Fidelity Canadian Growth Company-B||Cdn. Focused Equity||2.28||806.1||4/29/2011||9.2||1.4||17.6||23.3||-37.2||13.3||8.5||13.7|
|RBC North American Value||Cdn. Focused Equity||2.05||433.5||5/31/2011||9.0||5.4||15.3||28.7||-22.7||4.6||17.5||17.5|
|Mac Maxxum All-Canadian Dividend Cl||Cdn. Div. & Incm Equity||2.30||2.5||5/31/2011||8.9||5.3||11.3||-||-||-||-||-|
|S&P/TSX Total Return||3.6||17.6||35.1||-33.0||9.8||17.3||24.1|
|Source: Globe Investor, fund companies|
© 2007 The Globe and Mail. All rights reserved.
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