Morningstar Manager Research analysts cover more than 150 different equity, fixed income, and allocation strategies in Canada, which is only a fraction of the nearly 3,000 ratable options available to Canadian investors.
We aim to cover the funds in which Canadians have the most money and interest. There are a lot of additional funds, however, with impressive returns, differentiated approaches, and/or familiar investment teams that may deserve more attention. The Morningstar Prospects list highlights some of these strategies.
The team spent the last six months looking at equity funds, which resulted in two new adds to our Prospects list: Manulife Climate Action and TD Global Equity Focused. With these two latest additions, there are now 20 strategies on the Morningstar Canada Prospects list.
You can read the full report here.
Below, we outline what makes these two funds standouts.
Manulife Climate Action Fund
Sustainable Quality
Manulife’s fundamental equity team takes its quality-focused approach to global equity. It looks for companies that can generate cash and whose shares look cheap relative to that generation. After identifying attractive companies, it adds sustainable-investing considerations – looking for companies that are reducing emissions or on a clear path to reducing their emissions.
Why We’re Adding It to the Prospects List
Clear and quantifiable metrics for quality and valuation help the team to stay disciplined. Its intensive research involves a restatement of a company’s financials going back 10 years. Manulife’s ESG team also comes into play here, partnering with the group to create monitoring tools for its portfolio.
Manulife Climate Action – also distributed in Europe – is, as of this writing, the only Canadian fund that has met the European Union’s Sustainable Finance Disclosure Article 9 regulations.
TD Global Equity Focused Fund
A Deep and Experienced Team
Managed by TD Asset Management’s fundamental equity team, this strategy has been led by managers Damian Fernandes and Benjamin Gossack since its inception. The team looks for quality companies that can grow their cash. It looks for price catalysts and secular trends like the development of artificial intelligence. The result is a 50-60-holdings portfolio that’s fairly active versus its MSCI World bogy.
Why We’re Adding It to the Prospects List
Bottom-up and quantitative analysts combine to keep on top of this strategy’s investment universe. More than 25 analysts cover stock sectors and a five-member quant and risk-management team backtests factors and refines stock screens.
The managers have some freedom to be on the sidelines. The strategy allows for 15% in cash, though its cash stake has not yet gone beyond the 9% it hit in April 2020.
