Alan Pasnik, manager of the $150-millionMackenzie Maxxum Global Explorer Class, couldn't be happier with the fund's go-anywhere investment mandate. That's perfectly understandable, since the fund was created according to his blueprint.
"I wrote the prospectus and designed the fund to be as free ranging and flexible as possible," says Pasnik. "It's global because I found it was just getting more difficult to find value situations in the market." Pasnik, vice-president, investment management at Mackenzie Financial Corp., has managed the fund since its inception in September 2005. A former protégé of the famed deep-value investor Peter Cundill, the 41-year-old Pasnik remains very firmly in the value camp.
Pasnik's value criteria are based on fundamental, by-the-numbers research. The key metrics that he favours include stock prices that represent deep discounts to the value of a company's assets, and low price-to-earnings and price-to-cash-flow multiples. He seeks to buy quality companies that are out of favour, but with the expectation that there will be a catalyst to enable the company's intrinsic value to be recognized.
Currently, Pasnik is finding value primarily in North America in both large and small capitalization companies. In particular, he sees U.S. large caps as being relatively defensive and representing some of the best opportunities within a global context.
To remove U.S. currency risk, however, the fund is substantially currency-hedged. "Right now the hedge position is about 85% of the U.S. dollar value," says Pasnik.
Among the approximately 40 holdings, about 50% of the portfolio is currently invested in large-cap stocks. When Pasnik considers a large-cap stock extremely inexpensive, with very little downside risk, he's held positions as high as 8% of the overall portfolio. When it comes to smaller companies, he thinks that Canada has the most compelling market in terms of disclosure and valuation.
Pasnik says his fund is absolute return-oriented, so he is not handcuffed to any index. This is evident in his industry sector weightings. For instance, Pasnik currently holds almost 19% in energy stocks, a significant overweighting. But he holds very little in financial services and has no holdings in base metals.
Nonetheless, Pasnik is cognizant of his industry exposure from a risk perspective. "I certainly don't want 50% in energy or a large amount in base metals," he says.
Pasnik isn't averse to allowing his cash reserves to build when markets turn pricey, or when he wants to keep some buying power in reserve to capitalize on value opportunities. Currently, his cash position is about 18%, and has ranged between 10% and 32% in the past year.
Born and bred in Windsor, Ontario, Pasnik graduated with a bachelor of commerce from the University of Windsor in 1988. Upon graduation, he joined an accounting firm as an articling student. He now holds a chartered accountant designation. In 1991, he joined the Bank of Nova Scotia as a loan officer. In 1992, Pasnik and his father set up a small investment business.
Then in 1995, Pasnik joined Cundill Investment Research Ltd. in Vancouver as an investment analyst, where he later became head of Canadian equities for several years. The Mackenzie global fund is a sort of "hybrid" of the previous Canadian equity and balanced funds that he ran at Cundill, Pasnik says.
Along with his father, Pasnik considers veteran value manager Peter Cundill a mentor and keeps in touch with people in his organization.
Pasnik joined the Mackenzie Maxxum team in July 2005, and is responsible for approximately $152 million in total assets under management. Apart from meetings at Mackenzie's Toronto office, he manages the fund from his home office in Windsor.
Compared to a decade ago, stocks that are trading at discounts to cash and book value are not as prevalent now, says Pasnik. For example, 10 years ago he would never have bought Dell Inc. ( DELL/NASDAQ). But he now considers it cheap in terms of its business model, the strength of its balance sheet and the quality of its management.
For much the same reasons, he also likes Wal-Mart Stores Inc. ( WMT/NYSE). "If there was one stock that I was to invest in 100%," says Pasnik, "it would be Wal-Mart, simply because I don't really see any downside risk. I'm happy to sit and wait with something that represents good value"
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