Anum Siddiqui: CI Cambridge Canadian Equity is one of our latest medalists in the Canadian Focused category, earning a Morningstar Analyst Rating of Bronze.
There's a lot to like about this fund, starting off with its lead manager, Brandon Snow. Snow was previously a manager at Fidelity Investments and was brought over to Cambridge in 2011 by its founder and fellow ex-Fidelity portfolio manager, Alan Radlo. Snow and his analyst team aim to protect investors' capital during market downturns and focus their fundamental research on companies that generate sustainable free cash flows, and that have management teams that not only have a good track record at allocating capital, but are also aligned with shareholders' interest.
This research typically leads to the fund's investment in core holdings, which make up the bulk of the portfolio. However, the fund also invests in what they deem as non-core holdings. These non-core investments have less sustainable advantages and are purchased when the team believes they have a temporary informational edge on its stock. The temporary nature of this edge causes the fund to exit out of non-core positions within a short time period, which has historically contributed to the fund's higher turnover. However, Cambridge has emphasized their increased focus on core investments and expect this shift to bring down the fund's higher turnover in the future.
As a Canadian Focused strategy, the Cambridge fund has the flexibility to invest outside of Canada and has taken full advantage of this freedom. One of the causes for the fund's large underweight to Canadian equities is its continued absence from the country's large banks, which the team has believed to be overvalued relative to the opportunities they have found in the U.S.
The fund has performed well over Brandon Snow's tenure, significantly outpacing the S&P/TSX and the average category peer. The fund has yet to prove its ability to protect capital during a severe market downturn, but it has shown that it can outperform the TSX during its months of negative returns.
Lastly, investors can expect this fund's cash levels to rise to high levels. While its high cash allocation has been a drag on performance, the team's absolute return approach makes them unafraid to park assets in cash if they can't find the right opportunity.
