Canadian fund managers don't come any bigger than RBC Global Asset Management. It has become the perennial market leader in mutual-fund assets and sales. Last year, bank-owned RBC GAM had $7.9 billion in net new sales of long-term funds, or 17.5% of the industry total.
When you look beyond the aggregate numbers, however, RBC GAM's assets are heavily skewed toward domestic equities, balanced funds and fixed income, as opposed to U.S. and other foreign equities.
Of the total $150 billion in mutual funds under management in all asset categories as of the end of February, only 9% was in U.S. equity funds. And an even more modest 7% was in Europe, Asia and other non-North American equity mandates.
These proportions are up from last year and are destined to grow further, with RBC GAM's overseas operations -- London-based RBC Global Asset Management (UK) Ltd. and Hong Kong-based RBC Investment Management (Asia) Ltd. -- expanding their foreign-investing capabilities and taking on new fund mandates.
There are good reasons for Canadians to be choosing to invest more of their money outside Canada, says Dan Chornous, chief investment officer of RBC GAM. "We want to take advantage of this opportunity," he told Morningstar in an interview, citing the RBC organization's financial strength and stability as key competitive advantages in the post-2008 environment. Adding to RBC GAM's heft is its institutional business, representing more than half of its total $315 billion under management.
RBC moved to significantly bolster its global capabilities earlier this year with the hiring of 10 global specialists for its London operation, led by Habib Subjally, who was appointed senior portfolio manager and head of global equities. Subjally and nine colleagues joined RBC from First State Investments (UK) Ltd., where they had previously managed US$2.5 billion for institutional and private clients.
Five years ago, says Chornous, RBC GAM would face challenges in convincing clients concerning the investment management, administrative and client-service resources devoted to global investing. "I don't think there are questions about that now," he says. "People consider us a very legitimate alternative."
Among RBC's notable successes is the $1.6-billion RBC Emerging Markets Equity 
, managed out of the London office by a team led by Philippe Langham. Since its launch in April 2010, the fund has become the largest in its category and has a 5-star Morningstar Rating for its risk-adjusted returns.
But there have also been disappointments for RBC fundholders. Among them are fourth-quartile returns over the three and five years ended Feb. 28 for RBC U.S. Equity and RBC Asian Equity, and below-average returns over five years and 10 years for RBC European Equity and RBC International Equity.
Though relative performance has picked up over the past three years for the European and international-equity mandates, there's clearly room for improvement in various foreign-equity categories.
Not content to simply reinforce existing mandates, RBC is expanding its foreign-equity line-up. Last month it launched four new funds with global equity, U.S. equity, Japanese equity and Asia ex-Japan equity mandates. They are:
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| Dan Chornous | |
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RBC Global Equity, a primarily large-cap fund managed by the London team led by Subjally. Seven of the team members are sector specialists, and two others are experts in risk management and portfolio construction. The fund will invest in markets around the world, including emerging markets. The team will favour companies that have proven business models, operate in growing markets and that have strong management and corporate governance.
As Chornous explains, the investment process for RBC Global Equity will be based on a combination of fundamentally driven stock selection and quantitative risk analysis. This process is designed to avoid being overly exposed to a particular investment style or to variables such as oil prices.RBC U.S. Equity Value, whose strategy is to invest in high-quality companies trading at prices that appear to offer attractive value relative to the total market. The fund's co-managers are Stu Kedwell and Doug Raymond, both of whom are senior vice-presidents and senior portfolio managers of North American equities with Toronto-based RBC Global Asset Management Inc. They are co-heads of the Canadian equity committee. Kedwell is also a member of RBC's investment-strategy committee, which is responsible for the firm-wide asset mix. As is the case with their existing mandates, the co-managers of the new fund will rely on a combination of fundamental stock selection, quantitative models and technical analysis.
RBC Japanese Equity and RBC Asia Pacific Ex-Japan Equity, managed by RBC Investment Management (Asia) in Hong Kong. The lead manager of both funds is Mayur Nallamalla, senior portfolio manager and head of Asian equities.
Nallamalla leads a seven-member team which has expanded from four investment professionals 18 months ago. As part of its investment process, the team assesses economic growth trends and market valuations and identifies promising industry sectors and themes. Stock selection is primarily based on fundamental research and an understanding of the company's business and its outlook. In building the portfolio, the team will also consider quantitative and technical factors.
The minimum initial investment is $500 for most retail series of the four new funds. These include the no-load series A, sold primarily through RBC bank branches; the advisor series (which offers a choice of front-end-load or low-load purchase options); Series D for self-directed investors which has a reduced trailer fee of 0.25% annually and is available mainly from the discount brokerage RBC Direct Investing; and Series F, which is for fee-based accounts. For Series A and the Advisor series, the trailer fee payable by the fund company to brokers and dealers is 1% annually.
Also available are two high-net-worth purchase options : Series H for commission-based accounts and Series I for fee-based accounts. These two series required a minimum balance in the fund of $200,000. (See table for management fees for each purchase option.)
| RBC's management fees for its new foreign equity funds | ||||||||
| Fund | Series A | Advisor Series |
Series D | Series F | Series H | Series I | ||
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| RBC Global Equity | 1.85 | 1.85 | 1.10 | 0.85 | 1.70 | 0.70 | ||
| RBC U.S. Equity Value | 1.75 | 1.75 | 1.00 | 0.75 | 1.60 | 0.60 | ||
| RBC Japanese Equity | 1.85 | 1.85 | 1.10 | 0.85 | 1.70 | 0.70 | ||
| RBC Asia Pacific Ex-Japan Equity | 1.85 | 1.85 | 1.10 | 0.85 | 1.70 | 0.70 | ||
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| Source: RBC Global Asset Management Inc. | ||||||||
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