, the investment goals have been consistent.
"Our goal is preservation of capital and stable, tax-efficient distributions," says Wicks, 44, vice-president, Canadian equities, with MFC Global Investment Management in Toronto. Using a buy-and-hold approach, and a value-oriented discipline, Wicks has guided the 4-star rated fund (formerly known as Elliott & Page Monthly High Income) through market ups and downs, and generated solid returns over the long term.
For the five and 10 years ended March 31, the fund had an annualized return of 11.3% and 11.1%, respectively. In contrast, the median fund in the Canadian Equity Balanced category averaged 9.8% and 5% over the corresponding periods.
What has changed over the years is the fund's orientation and subsequent categorization. The fund always had the ability to invest in several asset classes, including bonds and common equities, but in the early years Wicks emphasized income trusts because they were valued more favourably.
As that emphasis waned, and Wicks shifted more attention to common equities, the fund moved to its current category. The fund is dominated by a 44% common equity weighting. There is also 27% in bonds, 25% income trusts, and 4% cash. The fund's benchmark is 60% equities, which includes income trusts, and 40% fixed income.
"This has been a difficult time, no question. But the process hasn't changed," says Wicks, adding that he and co-manager Jonathan Popper, assistant vice-president at MFC, receive performance bonuses based on absolute returns. "The fund is geared to paying income, and will have more financials and telecom names on the equity side than a regular balanced fund."
The fund's returns have lagged in the past six months, mainly because of the 20% exposure to financial service stocks. But that hasn't impeded its ability to keep up its fixed monthly distributions of six cents per unit. At the fund's recent net asset values, this represents about a 4.75% payout rate.
Since Wicks doesn't see much value in bonds, the fixed-income weighting is on the low side. The equity weighting is "getting to the higher end of the range," he says, "as we are seeing great opportunities."
Wicks and Popper screen every company on the TSX and then come up with buy and sell targets for stocks with solid fundamentals and low price-to-book-value ratios. "A lot of companies are trading much closer to the downside [of the book value measure] than they are at the upside," says Wicks. "We're seeing a lot of value. The good news is that many companies are paying high dividends. We're being paid to wait."
Wicks limits positions in any one holding to about 4.5% of fund assets. Portfolio turnover has been modest, at 25% in 2007 and 15.8% in 2006.
Petro-Canada ( PCA/TSX) is one of the top equity holdings. The integrated oil firm is starting a new refinery in Edmonton, which will add considerably to its bottom line in 2010. "The street does not recognize that," says Wicks, noting that he and his colleagues have been adding to the position on weakness.
While Petro-Canada pays a very modest 1% dividend, Wicks expects the stock price to rise appreciably. The stock is trading at 1.7 times book value, yet the sell target is 2.5 times, or about $80.
Another favourite is Power Financial Corp. ( PWF/TSX), which is down around 6% year-to-date. "The market is more focused on corn prices and potash that are going up," says Wicks, adding that Power Financial has a 3.5% dividend yield. "We hope that the value will be realized," he says. "Management has been great at execution. Right now, it's out of favour."
A native of Sault Ste. Marie, Ont., Wicks has spent 21 years in the investment industry. After graduating in 1987 with a bachelor of arts in economics from the University of Toronto, he joined Aetna Canada and worked in plan administration. In 1991, he became a financial analyst in the group life division.
Three years later, Wicks was supervisor of pension accounting. In 1996, he was hired as an analyst at Elliott & Page Ltd., and was involved in the income trust fund from its inception in September 1997. "It was a great opportunity to develop my cash flow analysis and understanding," says Wicks, who was appointed lead manager in May 2000.
In 2002, Elliott & Page's asset management arm was rebranded as MFC Global. Wicks is also responsible forMLI Monthly High Income (whose four versions have assets totalling $1.8 billion) and the $221.9-millionManulife Dividend. All told, he and his four-person team oversee about $7 billion in assets.
Wicks is reluctant to predict where markets are going, yet he is buoyed by the fact that equity valuations are attractive. "We're not sure when the U.S. slowdown will end. But clearly, between the lowering of interest rates and the U.S. fiscal stimulus package coming in July, hopefully later this year, the U.S. will rebound," says Wicks. "And that will lead to better equity markets."
