Over the past two years, Ian Ainsworth has made major changes to the geographic and sector exposure of the oldest mutual fund in the Mackenzie family, originally named Industrial Growth and now named Mackenzie Growth.
"The big shift was to immediately invest 50% outside of Canada to the max, to move the mix more to the U.S. because of fundamental factors," says Ainsworth, who assumed responsibility for the fund in January 2011. "We also reduced the materials and energy exposure for exposure in technology and health care."
Currently, the fund is weighted almost 30% in the U.S., roughly double the 15% it held at the end of December 2010. Information technology, a sector that is familiar ground for Ainsworth, now represents 12% of the overall fund, up from 7.1% formerly. The materials sector, which has generally figured prominently in the fund under former managers dating back to Mackenzie co-founder Alex Christ in the late 1960s, now constitutes 12.6% of assets, down from 23.8%.
Ainsworth, 62, is a senior vice-president, investments, and portfolio manager at Mackenzie Investments. He took over Mackenzie Growth from Fred Sturm, who stepped down to concentrate on resource-based mandates. Ainsworth has also managed Mackenzie Universal North American Growth Class since November 2006.
"The team has 20 years' experience in international markets," says Ainsworth, "and not a lot of Canadian managers have that experience. I think now it's time to diversify outside of Canada, to take advantage of the greater selection of health care, technology and consumer (stocks)."
Ainsworth brings extensive experience in technology investing to his current role. A native of London, England, he grew up in Nova Scotia and graduated with a bachelor of arts in economics from Dalhousie University in 1974. After a year of travel, he pursued further studies and received an MBA from Dalhousie in 1977. Upon graduation, he moved to Toronto to work briefly at Traders Group in the planning department.
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In 1978, Ainsworth joined Confederation Life as a metals and technology analyst. His long-standing colleague, Mark Grammer, was also trained at the company in value investing, and "we bring that discipline to growth today."
Three years later, Ainsworth joined Ruggles and Crysdale, an institutional investment firm, as head of research. That firm later became part of Guardian Capital Inc. In October 1987, the month of a major stock-market crash, Ainsworth left to start his own firm with another partner. Facing challenging market conditions to launch a new company, Ainsworth returned to Guardian Capital a year later, where he managed its investment account.
In 1989, Ainsworth moved to Black Galper Heesels Ltd. as an equity manager. In 1992, he joined Altamira when the firm was "starting to get traction" as an investment-fund company. Then in 2002, he left the firm shortly after it was acquired by National Bank of Canada, joining Mackenzie at the end of March 2003.
Ainsworth and portfolio manager Mark Grammer are the co-leaders of Mackenzie's growth team. Other portfolio managers on the team include Phil Taller, who joined in July 2011 and brings extensive expertise in the U.S. mid- and small-cap space, and Chuck Bastyr, another former Altamira manager, who joined Mackenzie this year. The Toronto-based team is responsible for approximately $2 billion in total assets under management.
Mackenzie Growth represents the growth team's "core" mandate and reflects the global view for investment opportunities. The focus is on large, quality companies in the developed world and emerging markets.
Three key growth themes drive the portfolio. From a macro perspective, "we still like Asia," says Ainsworth, "the theme of the Chinese consumer." A second theme, "in this decade, clearly, the U.S. industrial rejuvenation has begun, and we started buying."
Ainsworth believes the U.S. market will move ahead once some of the macroeconomic issues are dealt with, "and I think we're at the tail of those issues." Third, the team likes the secular theme of innovation in health care and technology, drawing on their collective strengths and experience.
The Mackenzie growth team seeks companies that have predictable earnings and superior business models to grow faster and more profitably than competitors. They favour strong balance sheets, superior growth of sales, earnings and cash flow, and positive earnings surprises. Their qualitative research includes meetings with company management, and evaluating business models.
The fund's roughly 50 holdings are currently weighted 60% in large-capitalization companies, 30% in mid-caps and 10% in small-caps. The average portfolio turnover, says Ainsworth, is 20% to 30% a year.
An example of a top holding outside Canada is Google, Inc. GOOG, a global provider of online information. Along with great long-term growth opportunities and a global footprint, "it dominates the search business," says Ainsworth, "and the company is growing 15% to 20% per year." In addition, the company has "incredible cash flow and no debt."
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