We exclude mutual funds in the following categories, as we look at pure equity (actively managed) funds that are not sectoral, that is not emphasizing a particular industry of the Canadian economy, for diversification purposes and avoiding speculation on which sector will do better at a particular point in the business cycle. We aim to include funds in the database that buy and hold good businesses, not to time the business cycle.
| ALTERNATIVE CANADIAN FIXED INCOME BALANCED CANADIAN FIXED INCOME CANADIAN FIXED PAY CANADIAN SHORT TERM FIXED INCOME CANADIAN INCOME TRUST EQUITY CANADIAN MONEY MARKET FINANCIAL SERVICES EQUITY GLOBAL FIXED INCOME GLOBAL FIXED INCOME BALANCED HEALTH CARE EQUITY HIGH YIELD FIXED INCOME NATURAL RESOURCES EQUITY REAL ESTATE EQUITY |
2010 TARGET DATE PORTFOLIO 2015 TARGET DATE PORTFOLIO 2020 TARGET DATE PORTFOLIO 2020+ TARGET DATE PORTFOLIO CANADIAN INFLATION PROTECTED FIXED INCOME CANADIAN LONG TERM FIXED INCOME INDEX MISCELLANEOUS PRECIOUS METALS EQUITY RETAIL VENTURE CAPITAL SCIENCE & TECHNOLOGY EQUITY TACTICAL BALANCED US MONEY MARKET |
We impose the following constraints to the remaining mutual funds; these constraints are linked to the normal value investing screening process.
A) P/E <=13
B) P/BV <=1.5
C) Div. yield >=1%
D) Turnover <=30%
E) # of stock holdings <=80 stocks.
We further constrain the mutual funds based on the particular weight of the fund to four sectors that value investors would normally not invest in either due to lack of expertise or as to make money one would need to be a good market timer, and so we require the mutual funds to have certain weight on these sectors, as indicated below.
Software <=5%
Hardware <=5%
Industrial materials <=10%
Energy <=20%.
or have no more than 30% of their stocks in these sectors.
As a final test, we should require the mutual funds not to be too highly correlated with the market portfolio; that is the fund not to be a closet index fund. As we only have access to annual data over a five or maximum ten year period, this restriction would not be appropriate as it may bias the funds included in our database and so we have decided not to activate this screen at this point.
R-Squared <=95%
April 2010
Step 1: We started our research with 10014 funds; this step eliminated 5082 funds.
Step 2: This step eliminated 4728 funds.
Step 3: This step eliminated 152 funds. After all above screenings, the number of funds left was 52.
January 2010
Step 1: We started our research with 8125 funds; this step eliminated 3955 funds.
Step 2: This step eliminated 4001 funds.
Step 3: This step eliminated 107 funds. After all above screenings, the number of funds left was 61.
November 2009
Step 1: We started our research with 8060 funds; this step eliminated 1983 funds.
Step 2: This step eliminated 5515 funds.
Step 3: This step eliminated 454 funds. After all above screenings, the number of funds left was 72.
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