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Positioning Empire Life Dividend Growth Fund during COVID-19 and beyond

Investments, Off the Cuff

Posted by Doug Cooper

Apr 23, 2020 3:23:15 PM

Senior Portfolio Manager, Canadian Equities
Empire Life Investments Inc.
Gestionnaire principal de portefeuille, Actions canadiennes
Placements Empire Vie

Off the cuff with Doug Cooper

Find out how Doug Cooper is positioning the Empire Life Dividend Growth Fund during COVID-19 in this Off the Cuff video.

 

 

 

 

Transcript:

Greetings!  My name is Doug Cooper, Senior Portfolio Manager at Empire Life Investments and lead manager of the
Empire Life Dividend Growth Fund. Like many of us, myself and the entire Empire Life investment team is working from home, to do our part to help flatten the curve.  I want to take this opportunity to thank all the front line workers. Without them, we would not be able to get through this unprecedented global health crisis brought on by COVID-19.

I want to describe the investment approach I’ve taken in managing the Dividend Growth Fund since I became the lead manager in June of 2019. Before doing so, I want to highlight that an important contributor to managing the Fund is the substantial Canadian and global investment experience across our team which collectively amounts to approximately 275 years, spanning both equities and fixed income.

For the Dividend Growth Fund we want to own the highest quality businesses that share a number of attributes including:

1) a strong competitive position; 

2) attractive, visible medium-term growth prospects;

3) conservative capital structures and; 

4) strong management teams with a long track record of effective capital allocation.

However, it's critically important to mention that we will only buy these companies at an attractive valuation, which often requires both patience and at times a contrarian view. And because we employ a longer term view of about 3-5 years we can take advantage of short-term dislocations in the marketplace. I encourage you to watch my Off the Cuff video on Intact Financial, which is a great example of our investment style in action.

The Dividend Growth Fund should be considered a way to gain conservative exposure to equities primarily in Canada but also globally. As a result, the vast majority of companies we aspire to own will have predictable and attractive medium-term growth prospects and ensures not just dividend sustainability but also dividend growth over time We take advantage of the Fund’s ability to invest up to 30% outside of Canada, where the investible universe of high quality companies is much larger. Given the cyclical nature of Canada’s economy, high quality companies with defensive growth attributes often command a premium valuation in the market place, so having the flexibility as well as the skill-set to invest in the U.S., Europe and Asia is an important way to add value to the Fund. 

Today, approximately 25% of the Fund is invested outside of Canada, mostly in Europe, the U.S. and Japan.  I expect the foreign content of the Fund to move closer to 30% over time. The Fund will be fairly concentrated with about 40-50 names and exposure to cyclical sectors, such as energy, will be modest.  In the case of energy, the Fund will always be conservatively positioned mostly with mid-stream companies and pipelines whose free cash-flow is much less sensitive to the level of energy prices. The Fund may also hold a reasonable level of cash and this level will fluctuate depending on the opportunity set. As an example, in January and February of 2020, the Fund had a healthy level of cash. Cash levels declined during the COVID-19 related equity market sell-off in February and March as we selectively put some money to work. Today the Fund continues to have a healthy level of cash giving us the flexibility to opportunistically put money to work in the event of any further market weakness.

In summary, our investment approach and investment style make the Empire Life Dividend Growth Fund an excellent vehicle for conservative equity exposure primarily in Canada but also globally. Our longer term view, and deep understanding of businesses, combined with our global approach maximizes the Fund’s opportunities set.  Finally our investment team’s extensive experience is critically important to executing on the Fund’s objectives.

Thank you for listening. Until next time, stay safe and healthy.  

 

Related articles:

Generating investor value with Intact Financial


Segregated Fund contracts are issued by The Empire Life Insurance Company (“Empire Life”). A description of the key features of the individual variable insurance contract is contained in the Information Folder for the product being considered. Any amount that is allocated to a segregated fund is invested at the risk of the contract owner and may increase or decrease in value. Past performance is no guarantee of future performance. All returns are calculated after taking expenses, management and administration fees into account.

This document includes forward-looking information that is based on the opinions and views of Empire Life Investments Inc. as of the date stated and is subject to change without notice. This information should not be considered a recommendation to buy or sell nor should it be relied upon as investment, tax or legal advice. Information contained in this report has been obtained from third party sources believed to be reliable, but accuracy cannot be guaranteed. Empire Life Investments Inc. and its affiliates do not warrant or make any representations regarding the use or the results of the information contained herein in terms of its correctness, accuracy, timeliness, reliability, or otherwise, and does not accept any responsibility for any loss or damage that results from its use. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.  

Empire Life Investments Inc. is the Manager of the Empire Life Emblem Portfolios and Empire Life Mutual Funds (the “Portfolios” or “Funds”). The units of the Portfolios and Funds are available only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such units.

Empire Life Investments Inc., a wholly owned-subsidiary of The Empire Life Insurance Company, is the Manager of Empire Life Mutual Funds and the Portfolio Manager of Empire Life Segregated Funds issued by The Empire Life Insurance Company.

April 20, 2020

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