Following the launch of Morningstar Analyst Ratings for ETFs in October, Morningstar's manager research analysts updated their assessments of 15 mutual funds under coverage in November and early December. Analysts introduced two new Analyst Ratings while reaffirming an prior rating and putting another fund Under Review after changes in management.
TD U.S. Mid-Cap Growth (Gold)
Morningstar Canada first rated this offering in November, but our U.S.-based colleagues have covered the strategy managed by the respected subadvisor T. Rowe Price since the 1990s. Manager Brian Berghuis has led U.S.-domiciled T. Rowe Price Mid-Cap Growth since its 1991 inception and this fund since 1993. All along, Berghuis harnesses T. Rowe's large, capable analyst team to identify a mix of steady growers and up-and-comers. Using a valuation-conscious approach keeps volatility relatively low by growth fund standards. Long-term performance has been stellar relative to the U.S. Small/Mid Cap Equity category, though less impressive versus the cost-free S&P Mid-Cap 400 Index thanks to above-average fees in its commission-based series. The F series, though, offers a better deal. The fund's experienced, capable manager and long record of success outweigh our concerns over price. An added bonus is its diversification potential: Canadian investors often rely on large-cap-focused strategies for U.S. equity exposure.
Beutel Goodman Canadian Dividend (Gold)
Although this offering is new to our coverage list, managers Mark Thomson and Stephen Arpin are no strangers to us. The duo, along with teammates William Otton, James Black and Pat Palozzi, were named Morningstar Domestic Equity Managers of the Year in 2013. Thomson and Arpin lead Gold-rated Beutel Goodman Canadian Equity, employing a similar strategy. This fund distinguishes itself from its purely domestic sibling by investing up to 30% of the portfolio in U.S. and international stocks, and by requiring a dividend of at least 1.5% at the time of purchase. Given the hefty sums Beutel manages in Canadian equities, these broader hunting grounds give the managers flexibility to invest where capacity constraints aren't a concern. This fund's Gold rating reflects our confidence that the managers can continue to harness their experience and discipline to produce peer-topping results.
Beutel Goodman International Equity (Neutral)
Beutel Goodman doesn't always spin investment gold. This fund shares its siblings' disciplined, value-oriented approach, but execution has been poor, leading to lousy long-term returns. Beutel has tried to right the ship by changing the crew. In mid-2013, for example, it enlisted long-time analyst Colin Ramkissoon as co-manager. In November of this year, the firm moved Ramkissoon off as a co-lead manager, bringing aboard Stanley Wu as his successor. Wu comes with 15 years of experience at Jarislowsky Fraser and joins existing co-manager K.C. Parker. (Ramkissoon continues to focus on Beutel's global strategies.) We placed this fund Under Review in response to the change in management before affirming the Neutral rating we had before Wu's appointment. Wu's experience and the added analytical strength he brings bodes well for the fund, but it's not yet clear if he can turn it around.
Capital International Global Equity (Under Review)
Capital Group recently announced that Galen Hoskin, one of this fund's three portfolio managers, would take an extended personal leave beginning Jan. 1, 2017. Leo Hee, who has been with the firm for 11 of his 22 years of investment experience, is Hoskin's successor. Capital Group employs a unique multi-manager approach, splitting the portfolio into independently managed sleeves. It's unclear how Hee's investment style will complement other portfolio managers'. We changed the fund's Morningstar Analyst Rating of Gold to Under Review while we evaluate this development.
In addition to the above changes, we have made updates to the Analyst Reports on the following funds, for which our Analyst Rating did not change:
| Beutel Goodman Canadian Equity Class D | Gold | ||||
| Beutel Goodman Small Cap D | Silver | ||||
| Chou Associates | Silver | ||||
| CI Black Creek Global Leaders Class D | Silver | ||||
| Franklin Bissett Cdn Equity A | Silver | ||||
| Franklin Bissett Small Cap A | Neutral | ||||
| Leith Wheeler Canadian Equity Series B | Bronze | ||||
| PH&N Overseas Equity D | Silver | ||||
| Sionna Canadian Equity A | Bronze | ||||
| TD US Blue Chip Equity - I | Silver | ||||
| Templeton Global Bond A | Silver | ||||
| Data as of Dec. 9, 2016 | |||||
