Do you invest in mutual funds?
Here at the Fool, we’re all about individual stocks, but a recent article in the Globe and Mail reminded me why I love Cymbria Corporation (TSX:CYB) as a cheaper and better alternative to owning actively managed mutual funds.
“In the U.S., everything’s getting more transparent. Canadians are pretty bright folks and yet their financial system is like North Korea. We know the reason — the banks control everything,” stated Alpha Architect CEO Wes Gray in the Globe and Mail. “Canada just seems so prime to move into the future but for some reason it’s slow on the uptake. A lot of it comes down to distribution channels where you never get to see the real fees. We would love to help people be more cognizant of fees and not just believing whatever the bankers are telling you.”
I’ve spent a lot of time writing about the financial services industry. It always amazes me how friendly Canadians are to the big banks, despite the fact they’re ripping us off at every turn.
Gray is right to suggest that if a mutual fund in the U.S. charged 2% in fees, it would be put out of business very fast. Yet most actively managed equity mutual funds in this country charge more than 2%. It’s just not right.
There is a solution
What would you say if I told you that I could provide you with an actively managed mutual fund that charges just 1.19% annually and delivers market-beating returns? Would you be interested? If you own any mutual funds, you should be. Here’s why.
I’m speaking about Cymbria, the neatest little small-cap stock on the TSX. I’ve discussed Cymbria several times over the past couple of years. The asset manager’s story is one that doesn’t get enough press but should.
The first thing that is attractive about Cymbria is that it trades on the TSX, so you can buy and sell it at any time during the trading day. Liquid is good.
The second attraction is that you get an actively managed portfolio of 44 Canadian and U.S. stocks for just 1.19% annually. Not only that, but the people managing the portfolio have had a lot of success over the years, outperforming the overall markets.
Tye Bousada, Ted Chisholm, Geoff MacDonald, Frank Mullen, and Andrew Pastor have consistently delivered the goods for their clients at EdgePoint Investment Group in Toronto. All are veteran portfolio managers who put their own money into the funds they manage as well as Cymbria.
The third attractive aspect of Cymbria is that you not only get a concentrated, actively managed portfolio of stocks for 1.19%, you also get a 20.7% stake in EdgePoint, so when they do well, you do well, and vice versa.
Over the past decade, Cymbria’s original $510,000 investment in Edgepoint has grown to be worth $223 million. On top of that appreciation, Cymbria’s generated $43 million in dividends from its stake in EdgePoint, a total return of more than 52,000%.
Now, I can’t guarantee that Cymbria’s stake in EdgePoint will see the same kind of return over the next 10 years, but I will say it’s a great 45th holding that keeps delivering value for shareholders.
What more can you ask for?
Since Cymbria’s inception through September 30, 2018, it’s achieved an annual return of 17.6%. Interestingly, it’s had positive returns in every year of its existence except 2008, its launch year.
The portfolio itself has $1.1 billion in total assets, which includes the $223 million investment in EdgePoint. Its top 10 holdings account for 48.8% of the portfolio with EdgePoint the number one holding at 19.6%.
The only caveat is that its stock price is currently trading at a 19% premium to its net asset value. The premium has gotten as high as 33% in the past, and it has traded at a discount, but not in recent years.
If you’re looking to avoid paying too much in fees for your professionally managed portfolio, Cymbria is, in my opinion, the best option available.
Fool contributor Will Ashworth has no position in any stocks mentioned.