Morningstar Magazine - February/March 2015 - 26

Dispatches

NTF. The direct funds are about 35 basis points
cheaper, though admittedly a bit of that
is no doubt related to the smaller account size.

Keep in mind that this discussion focuses on broad
trends. Investors can't assume that a given
fund will be either more expensive or cheaper than
most peers simply because it is or isn't on
an NTF platform. Investors need to investigate
for themselves, and comparisons still must be
made on a case-by-case basis. In cases where an
NTF fund is more expensive than average,
investors need to decide for themselves whether
the convenience is worth the added cost.
Kevin McDevitt, CFA, is a senior analyst covering active
strategies on Morningstar's manager research team.

Fund Managers of the
Year Winners
AMERICAS

Canada
Chart-topping performance isn't enough to win
one of Morningstar's Fund Manager of the
Year awards. If that's all it took, we'd have a pretty
easy job: We'd rank funds by their year-to-date
returns and give the best performers a trophy.
These wouldn't necessarily be deserving winners,
though. That's because 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.
Although our awards acknowledge strong
performance over the past year, no manager wins
without having delivered over the long haul.
What's more, we won't give them the prize unless
we're confident they'll continue to succeed.
We recognize Managers of the Year in
three categories: domestic equity, foreign equity,
and fixed income. Finalists must meet the
following criteria:
gManagement's fund (or funds) should be
Morningstar Medalists. That is, they've earned a

Morningstar February/March 2015

positive Analyst Rating (Gold, Silver, or Bronze)
from our manager research team, meaning
we think the strategy is likely to outperform in
the long term. The rating stems from our
confidence in management's abilities, the strength
and risks of its strategy, and the quality of its
investment decisions. We also examine riskadjusted returns and factors such as fund capacity
(its ability to buy suitable securities given its
asset level) to gauge the likelihood of a finalist
repeating its past success.
gFinalists should have turned in strong numbers in
the current calendar year and prior 12-month
period. We look for evidence that these returns are
consistent with management's strategy.
gFinalists should also have a history of fundholderfriendly behavior. For example, we like managers
who keep a close watch on their fund's capacity
and align their financial interests with those of
unitholders by heavily investing their own money
in the mandates they oversee.
We unveiled our winners at the 20th annual
Morningstar Awards on Nov. 26 in Toronto.
Domestic Equity
Martin Ferguson and Jeff Mo

Mawer New Canada
Ferguson and Mo, finalists in 2013, win top honors
in 2014 for their outstanding year at Mawer
New Canada. (Mawer New Canada is closed to
new investments.) The fund's 11% gain for
the year to date through December sits near the
top of the Canadian Focused Small/Mid Cap Equity
category. (It's also the highest return of any of
our finalists.) Big winners in energy and industrials,
such as Canadian Energy Services & Technology
CEU:TSX and Stella-Jones SJ:TSX, drove the fund's
success. Indicative of the team's long-term
approach, these winners are hardly newcomers to
the portfolio. Stella-Jones, for example, was an
early 2010 addition.
Focused on high-quality firms trading at reasonable valuations, Ferguson and Mo share the same
sound approach used by their Mawer counter-parts. (We recognized Mawer as Analyst Choice
Fund Company of the Year in 2013 and 2014 in part
to recognize this strength.) While Mo, who has
only been co-manager since 2012, is a relative
newbie, Ferguson has come to rely on him for his

sharp research skills. Mo's valuation consciousness has also improved the fund's sell discipline.
Foreign Equity
Tye Bousada and Geoff MacDonald

EdgePoint Global Portfolio
In their first nomination for Morningstar Manager
of the Year honors, Bousada and MacDonald
have come away winners. It's not hard to see why:
EdgePoint Global Portfolio's 18% gain through
December trounces its typical global equity rival by
9 percentage points. The fund benefited handsomely from its heavy U.S. weighting, especially in
financials like Wells Fargo WFC and tech holdings
such as Microsoft MSFT.
Their fund's late 2008 launch date gave Bousada
and MacDonald a golden opportunity to
build their portfolio when stocks were trading
at ultralow price tags, paving the way for
stellar performance. The fund's five-year return,
for example, beats that of 95% of its peers.
The managers, though, are more experienced than
their tenure here suggests. Bousada and
MacDonald delivered strong results at Trimark
(now called Invesco Canada) in the 2000s, and
the pair has worked together since 1996.
EdgePoint's disciplined investment process and
unitholder-friendly ethos seals the fund's appeal.
Fixed Income
PH&N Fixed-Income Team
PH&N Total Return Bond, PH&N Bond
PH&N's fixed-income team used a similar playbook
as runnerup CIBC this year, emphasizing rallying

corporate bonds as well. The team just executed
better: Through December, PH&N Total Return
Bond beats 90% of its peers in the Canadian
Fixed-Income category for the year to date.
Like its CIBC counterpart, the PH&N team benefits
from seasoned managers and analysts. But its
technical resources are virtually unrivaled by any
Canadian competitors. PH&N's BondLab
software allows the managers to precisely tailor
their portfolio to their desired risk profile and to
anticipate the impact of any trade. Moreover,
their portfolio construction tools have helped limit
the impact of mistakes, such as holding
troubled names such as Lehman Brothers in 2008.
The PH&N team also gets a substantial advantage

Morningstar Magazine - February/March 2015

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