Why Mawer Mutual Fund returns may deviate from the market | Investor Education

Investor Education

Why Mawer Mutual Fund returns may deviate from the market

December 6, 2017

A common question from investors is, “Why are my fund’s returns different from the market?” There are a few factors that make it misleading to look at the markets and then expect to see a mirrored reflection in your fund.

1. Active investment management

Because we are active investment managers (as opposed to passive) our funds do not mimic any benchmark. Our Funds will therefore often have different exposures than their respective benchmarks (e.g., securities, currencies, countries, sectors). In addition, we hold far fewer companies than an entire benchmark or index. For example, the S&P 500 Index encompasses 500 companies, whereas the Mawer U.S. Equity Fund invests selectively in approximately 50 companies that meet our investment philosophy criteria. Therefore our funds will not necessarily move in correlation with the overall market.

2. Currency

When looking at the relative performance of the funds you hold, it is important to make sure you are comparing apples to apples in terms of their reported currencies. The translation effect of a decreasing or appreciating Canadian dollar can have differing effects on the performance of some of our funds.

For example, you may notice that the S&P 500 Index went up on a particular date, but the Mawer U.S. Equity Fund went down. The fact that the Mawer U.S. Equity Fund is reported in Canadian dollars and the S&P 500 is reported in U.S. dollars could explain the discrepancy.

3. Short-term volatility

There can be a great deal of noise, or volatility, in the market over a short time frame. We suggest looking at the Mawer Funds’ performance record over a longer period of time (5-yr, 10-yr, etc.) when evaluating their track records as opposed to daily, monthly, or quarterly (3 month) performance periods.

Ultimately, we understand the need for investors to monitor the relative return of their portfolios. But we believe that following our investment philosophy (investing in wealth creating businesses with great management teams at a discount to intrinsic value) regardless of what the markets are doing, will best serve our clients over the long run.

Non-performance related material in this document reflects the opinions of the writer, and does not reflect fact or predictions of actual events or impacts, and cannot be relied upon for investing purposes or as investment advice or guarantees of any kind.

Disclaimers:

This communication is an overview only and it does not constitute financial, business, legal, tax, investment, or other professional advice or services. It is not intended to be a complete statement of the law or an opinion on any matter. If you (or any of your family members) are a U.S. citizen, hold a U.S. green card, or are otherwise considered a U.S. resident for U.S income/estate tax purposes, the Canadian and/or U.S. tax implications could be substantially different from those outlined herein. No one should act upon the information in this communication as an alternative to legal, financial or tax advice from a qualified professional. No member of Mawer Investment Management Ltd. is liable for any errors or omissions in the content or transmission of this email or accepts any responsibility or liability for loss or damage arising from the receipt or use of this information.

While we endeavour to ensure that the information in this communication is correct, we do not warrant or represent its completeness or accuracy. This communication is not updated, and it may no longer be current. To the maximum extent permitted by applicable law, we exclude all representations, warranties and conditions relating to this communication.

Mawer Investment Management Ltd. provides this publication for informational purposes only and it is not and should not be construed as professional advice. The information contained in this publication is based on material believed to be reliable at the time of publication and Mawer Investment Management Ltd. cannot guarantee that the information is accurate or complete. Individuals should contact their account representative for professional advice regarding their personal circumstances and/or financial position. This publication does not address tax or trust and estate considerations that may be applicable to an individual’s particular situation. The comments are general in nature and professional advice regarding an individual’s particular tax position should be obtained in respect of any person’s specific circumstances.