The Project
Write a report on a specific mutual fund by answering the list of 31 questions below. Copy and paste the questions from Learn into a word document, add a title page and answer the questions in that document.
The objective is to give you a general understanding of the practice of portfolio management by studying selected Canadian Mutual Funds. Through the project, you will become familiar with various categories and the information available about Canadian Mutual Funds. The project is to be done in groups of two.
Most of the information needed to complete the project is available on-line, in particular, at GlobeFund.com of the Globe and Mail and Morningstar Canada and at www.sedar.com . SEDAR is the filing system of the Canadian Securities Administrators (CSA) to which mutual fund companies (and all publicly traded companies) submit their reports.
Final Product
Put together all your work in a professional, creative manner. Ensure you include a cover page, with the following: Mutual Fund Name (not Investment company name)(s), Student(s) Name(s), Student Numbers, Date, and Instructor Name. The report must presented in a businesslike manner. The will be a 1% deduction for an incomplete title page.
Preparation
Choose one mutual fund from any of the following six categories as classified by Globefund.com: Growth, Growth and Income, International Growth, Aggressive Growth, Income, Capital Preservation, High Yield Debt, Bond Funds and Emerging Markets.
Limit your choice to funds covered by both GlobeFund.com and Morningstar.ca although the latter has a more extensive classification system. The fund you choose should have been in existence for at least ten years and have assets of at least $200 million. You may want to include funds that you or people you know have bought. It would make the research more relevant. You may also want to include either highly ranked funds or underperforming funds.
Ineligible funds include: money market funds; mortgage funds; asset allocation funds and fund of funds; non-North American Bond funds and other; therefore check with the instructor before picking a fund.
Tasks
Below is a list of questions for the fund you selected. Most of the questions are fact-finding. Open-ended questions for you to comment and discuss are in italics.
Cut and paste the questions below into a word document. Then proceed to answer each one. This will be the body of your report.
The Company (1 Mark)
- What is the name of the investment company (also referred to as Sponsor).
- How much are the total net assets managed by the company? (go to sponsor’s annual report)
- How many different funds does this company manage?
The Fund (3 Marks)
- What is the name of your fund? (half of a mark out of three)
- What is your fund’s category or asset class? (half of a mark out of three)
- What is your fund’s asset value? (half of a mark out of three)
- Provide the name of an ETF in the same asset class/same mandate. (half of a mark out of three)
- Who are the portfolio managers and what are their qualifications? You can usually find their biographies by googling both the manager’s name and the fund together, or go to the parent investment company’s website. Their names are usually listed in Morningstar. If available, provide the names of the manager of the ETF. (one out of the three marks)
Fund Objectives (7 Marks)
- What are the fund’s objectives? (one mark out of seven)
- What is the asset allocation of the fund? Report value and percentage in equity, fixed income, and cash. What are the sectoral weightings of the fund? Report value and percentage of the top 5 sectors. Same for the ETF. (two marks out of seven)
- What is the geographic composition of the fund? Report value and percentage of the top 5 regions or countries. (one mark out of seven)
- What are the value and percentage of the top 10 holdings (one mark out of seven)?
- Pick two of the fund’s top ten companies, briefly describe what they do and indicate why these companies fit into this fund. (two marks out of seven)
Current Issues (7 Marks)
- Do an on-line search for any news on the fund and its sponsor company going back at up to 3 years. Our library has access to the Globe and Mail’s archives. Talk to our librarians for help. Show that you have searched through Google or the Globe and Mail archives to answer this question. Marks deducted if you do not reference in the answer at least one of these sources. (two marks out of six)
- Based on the above, discuss three internal or external factors or developments that are important to the fund’s performance, e.g. change in a commodity price (Is the fund dependent on one or more commodity price such as oil), changes in regulations (interest rates, government regulations such as the change in the tax rules in 2011 for income trusts), regional or product specialization etc. (three marks out of six)
- Has the Fund been impacted by the stock market volatility seen during the last quarter of 2018? Show a chart of the fund vs a major stock market index and compare the two charts. (two marks out of seven)
Manager Style (4 Marks)
- What is the fund’s management style? Morningatar.ca reports the style of most of the 5-star funds. If you can’t find the style of your fund, see if you can tell from the objectives of the fund. (one mark out of four)
- What is the benchmark for the fund? (Morningstar usually lists several benchmarks in the graphs.) (half a mark out of four)
- Has your fund outperformed an ETF with the same mandate/objectives, (yes/No)? (half a mark out of four)
- Based on the objectives and management style, do you think the benchmark is suitable for the fund or not, and why? If not, what is a suitable benchmark? (two marks out of four)
Fund Risk and Return (7 marks)
- What is the management expense ratio (MER) of the fund, a competing fund, and the average in the same category? (one mark out of seven)
- What are the 1, 3, and 5 year returns of the fund and the benchmark? . (two marks out of seven)
- What is the volatility measure as stated on GlobeFund.com (low, medium, high)? Do you agree with this (one mark out of seven).
- Use a chart to show the price movement of the fund and the benchmark during the past five years. (you can manipulate the fund chart in Morningstar for any period, then copy and paste the chart into your report. (one mark out of seven)
- Report and comment on your observations of the above chart.(include a comment on one of the following for the fund: Compare performance of mutual fund to the comparable ETF. (two marks out of seven)
GlobeFund vs Morningstar (4 Marks)
- What is the fund’s 5-star ranking by GlobeFund.com and Morningstar.ca, respectively? (one mark out of four)
- Compare and contrast the ranking system of the above two sources. (one mark out of four)
- As an individual investor, evaluate GlobeFund and Morningstar as providers of mutual fund information. What are the strengths and weakness of each? (two marks out of four)
Overall (7 Marks)
Make sure you summarize your key findings and conclusions
- Based on the data that you have compiled, list and discuss the most interesting observations you have made about your fund from the answers you gave for each fact-finding question listed above. Include a comparison of your mutual fund to your ETF. (three marks out of seven)
- Are there any specific types of funds that a highly risk averse investor should avoid during this time? Why? (two marks out of seven)
- Based on your personal investment objectives and risk tolerance, what type of fund best suits you? Why? (two marks out of seven)
Sample Solution
