The Steadyhand Small-Cap Equity Fund has been one of the top funds in its category since it started in early 2007. But in getting there, the fund has traced quite a different path compared to that of the market and other small-cap funds. That's because the manager, Wil Wutherich, pays no attention to the indexes. He is truly a buyer of businesses and while he's very cognizant of being properly diversified, the fund looks nothing like the small-cap index, or any other index for that matter.
The Small-Cap Fund's different performance pattern was evident right out of the gate when it had a significant run up in its early days, which was a time when the overall market was relatively flat. In the back half of 2008, it was hit hard by the market meltdown, but wasn't down nearly as much as other funds. And so far in 2009, the fund has significantly lagged the indexes, both small and large cap, during the market rebound. It is up 1.6% year-to-date, while the S&P/TSX Composite Index is up 19% and the BMO Small-Cap Index is up almost 30%.
Why the current lag? It's always hard to attach a theme to this fund's performance. Because it holds a small number of stocks (15 currently), it only takes a few stars or laggards to significantly impact its short-term return. So far this year the fund has had its stars (Major Drilling, Calian Technologies, Canadian Helicopters), but not enough of them to keep it running with the pack. There have been some dogs (Glacier Media and Badger Income Fund particularly), but in the context of a small-cap fund, nothing remarkable.
I can make two general comments. First, the fund's lack of exposure to energy and resource stocks has hurt. These sectors have seen a dramatic turnaround so far this year. And second, not knowing how powerful this market rally was going to be, Wil has been running with more cash than he would have liked (10-13%). Any cash has been too much.
I talked to Wil today and we ran through the portfolio. As always, he knows why he owns each stock and at present, there are none that he is uncomfortable with. He is watching two of them for an opportunity to increase the position while focusing his research on a handful of U.S. names. Currently, the top 5 holdings are Stantec, Vecima Networks, North West Company, Evertz Technologies and Canadian Helicopters, all names that are familiar to long-term holders of the fund.
As I said in the Second Quarter Report, we should expect Wil to be out of synch with the market and look to take advantage of the ‘out-of-sync bad' times to set up the ‘out-of-sync good' times. Over the course of Wil's history, that has proved to be wise strategy.
The Small-Cap Fund's different performance pattern was evident right out of the gate when it had a significant run up in its early days, which was a time when the overall market was relatively flat. In the back half of 2008, it was hit hard by the market meltdown, but wasn't down nearly as much as other funds. And so far in 2009, the fund has significantly lagged the indexes, both small and large cap, during the market rebound. It is up 1.6% year-to-date, while the S&P/TSX Composite Index is up 19% and the BMO Small-Cap Index is up almost 30%.
Why the current lag? It's always hard to attach a theme to this fund's performance. Because it holds a small number of stocks (15 currently), it only takes a few stars or laggards to significantly impact its short-term return. So far this year the fund has had its stars (Major Drilling, Calian Technologies, Canadian Helicopters), but not enough of them to keep it running with the pack. There have been some dogs (Glacier Media and Badger Income Fund particularly), but in the context of a small-cap fund, nothing remarkable.
I can make two general comments. First, the fund's lack of exposure to energy and resource stocks has hurt. These sectors have seen a dramatic turnaround so far this year. And second, not knowing how powerful this market rally was going to be, Wil has been running with more cash than he would have liked (10-13%). Any cash has been too much.
I talked to Wil today and we ran through the portfolio. As always, he knows why he owns each stock and at present, there are none that he is uncomfortable with. He is watching two of them for an opportunity to increase the position while focusing his research on a handful of U.S. names. Currently, the top 5 holdings are Stantec, Vecima Networks, North West Company, Evertz Technologies and Canadian Helicopters, all names that are familiar to long-term holders of the fund.
As I said in the Second Quarter Report, we should expect Wil to be out of synch with the market and look to take advantage of the ‘out-of-sync bad' times to set up the ‘out-of-sync good' times. Over the course of Wil's history, that has proved to be wise strategy.
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