By Tom Bradley

On Wednesday and Thursday, Salman and I had the pleasure of visiting Montreal to do some research. We met a number of people, debriefed at charming street-side cafes and took in the old city at night, but our main purpose for the trip was to meet with Wil Wutherich, the manager of our Small-Cap Equity Fund.

Since we launched the Steadyhand funds in early 2007, the Small-Cap has been the best performing fund in our lineup. From inception to June 30th, it’s had a cumulative return of 84%, which translates into an annualized return of 7.6% per year.

Over the last year, however, the fund has given back some of the gains, primarily due to its exposure to the resource sectors. It’s down 15% for the year ending June 30th and has been hit hard again this month with the further decline in energy and gold stocks.

Here are some notes from our meeting with Wil:

  • In hindsight, the fund had too much energy, but Wil intends to maintain his exposure to this sector. He currently owns three oil and gas producers (TransGlobe Energy, Gran Tierra Energy and Arsenal Energy) along with Total Energy Services (drilling, transportation and oilfield rental services), ZCL Composites (manufacturer of fibreglass storage tanks for the petroleum industry) and Badger Daylighting (excavation services). Given the volatility in the resource sector, it’s likely that Wil will make some changes to his allocations to these stocks in the coming weeks.
  • The two mining stocks in the portfolio, Primero Mining and New Gold, have also negatively impacted returns. The price of gold has been declining and few investors like gold stocks today, but in Wil’s view, value has ‘come back into the sector’. He is looking to zig when other investors are zagging, so his bias here is to buy rather than sell.
  • In general, Wil is more excited than we’ve seen him in a while. As noted, the companies in the fund represent better value today and other names on his watch list have moved into his buy range.

As we’ve said previously, not all components of a portfolio will perform at the same time. A diversified portfolio is like a relay team. Different stocks, funds and asset classes carry the baton at different times. The Small-Cap Equity Fund has gone through a tough period, while the Equity and Global Equity Funds have been surging ahead. We never know how the race is going to play out, only that it’s long and unpredictable.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.