Mawer is the 2015 Morningstar Domestic Equity Fund Manager of the Year

EdgePoint, Fidelity managers make short list.

Christopher Davis 30 November, 2015 | 6:00PM

We recognize managers' skill in navigating the Canadian equity market with the Morningstar Domestic Equity Fund Manager of the Year award. The award acknowledges strong returns over the past year, but short-term returns take a backseat to long-term fundamentals. After all, there's a lot of noise in short term numbers; a one-year hot streak is often the result of luck or extreme risk taking.

Our finalists navigated a tricky environment in 2015. Faltering commodity prices hit the energy and materials sectors, hurting smaller names the most. The ripple effect on the economy, along with ongoing concerns about high debt levels and housing prices, weighed on the big banks. Meanwhile,  Valeant Pharmaceuticals (VRX), which briefly eclipsed  Royal Bank of Canada (RY) as the country's most valuable company by market capitalization, fell from grace amid accusations of accounting shenanigans.

As one would expect in an uncertain environment, investors favoured relatively steady telecommunication services and consumer staples firms, such as  BCE Inc. (BCE), Alimentation Couche-Tard (ATD.B) and  Loblaw (L), which turned in strong gains. Canadian managers also got a leg up from investing in U.S. equities, which benefited from the depreciating Canadian dollar, though our finalists outperformed largely on the strength of their domestic picks.

We announced the winner at the 21st annual Morningstar Awards on Nov. 25. Below, you'll see our finalist as well as our winners.

Finalist: Tye Bousada and Geoff MacDonald, EdgePoint Wealth Management

It has been a strong year for Bousada and MacDonald, who also scored a nomination for Morningstar Multi-Asset Manager of the Year for their efforts at EdgePoint Canadian Growth & Income Portfolio. Their all-equity EdgePoint Canadian Portfolio distinguished itself as well.

Whereas the other managers on our shortlist fared well by holding defensive names, Bousada and MacDonald believed more attractive valuations lay in more economically sensitive fare. While avoiding the telecom and staples holdings favoured by their defensive rivals, the managers' 2015 success stems from winning picks in the industrials and financials sectors, such as Onex Corp. (OCX) and Intact Financial (IFC). The team's all-cap approach has been a great success since the Canadian Portfolio's late 2008 launch. Although not tested in an extended downturn at EdgePoint, Macdonald and Bousada both enjoy long, successful track records over full market cycles at Trimark, which they left to found EdgePoint.

Finalist: Maxime Lemieux, Fidelity Investments

Lemieux's cautiously positioned portfolio has served Fidelity True North well in 2015. Driven by longstanding concerns over excesses in China's housing and debt markets, his defensive outlook isn't anything new. Believing a slowdown in China would reduce demand for commodities, Lemieux pared the fund's energy weighting in late 2014, while slicing its basic materials stake to record lows. His move proved prescient in 2015 as the price of energy and other commodities slumped amid slowing Chinese economic growth. Meanwhile, many of his long-time holdings, such as Couche-Tard, Metro (MRU) and  CGI Group (GIB.A), posted handsome gains. Valeant, a top-10 holding, has hurt more recently, though it had been a top contributor to returns as of September 30 (the end of our performance evaluation period).

Lemieux's ability to manage risk helps explain his fine long-term record at Fidelity True North, which he has led since November 2009, and at previous assignments Fidelity Canadian Opportunities and Fidelity Canada, which is sold in the United States. One knock against his record: Lemieux's fortuitously timed one-year sabbatical, which began in September 2008 as the darkest days of the financial crisis unfurled, limits our ability to assess his skill in severe downturns.

Winners: Jim Hall and Vijay Viswanathan, Mawer Investments

Mawer Canadian Equity managers Jim Hall and Vijay Viswanathan return to the winners' circle in 2015. Their focus on high-quality firms with consistently strong profitability has long meant a historical aversion to energy and materials stocks. That stance was a big plus in 2015, though it's the ongoing strength of long-time and less-widely-held picks like Constellation Software (CSU) and CCL Industries (CCL.A) that impress us more.

While the managers aren't averse to widely held banks like RBC and  Toronto-Dominion (TD), their willingness to go off the beaten path has contributed to their outstanding long-term record. Mawer Canadian Equity owns the best record in the Canadian Equity category over five, 10 and 15 years. Investors shouldn't expect such sterling performance in every market -- the fund lagged in the go-go markets of the late 1990s and mid-2000s -- but the managers remain at the top of their game.

Fund name YTD 1 Yr 3 Yr 5 Yr
Mawer Canadian Equity A -0.38 3.33 14.98 12.11
EdgePoint Canadian Portfolio Series A -1.17 -0.21 11.88 8.25
Fidelity True North Sr B -2.04 1.74 11.69 8.05
Source: Morningstar. Data as of September 30, 2015

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alimentation Couche-Tard Inc Class B80.13 CAD-1.26
Bausch Health Companies Inc29.40 CAD-1.44
BCE Inc61.97 CAD-0.10
CCL Industries Inc Class A60.01 CAD1.04
CGI Inc Class A103.90 CAD-0.13
Constellation Software Inc1,294.55 CAD1.19
Intact Financial Corp127.46 CAD0.61
Loblaw Companies Ltd71.82 CAD-0.53
Metro Inc54.76 CAD-0.13
Onex Corp75.58 CAD0.29
Royal Bank of Canada99.35 CAD-0.56
The Toronto-Dominion Bank72.64 CAD0.22

About Author

Christopher Davis

Christopher Davis  Christopher Davis is Director of Manager Research at Morningstar Canada.