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Verus Advantage Equity

Statement of Investment Policy | Verus Advantage Equity Mandate

 

Download PDF Verus Advantage Equity

 

Purpose

The Verus Advantage Equity portfolio has been designed by Verus Financial to provide a platform for private clients to invest in a concentrated portfolio of high-yielding equity securities of Canadian and U.S. publicly traded companies.

Objectives
  1. The mandates investment objective is to protect and compound capital over the long term by investing in an actively managed investment portfolio that delivers superior risk adjusted returns.
  2. Protect capital during market downturns by increasing cash up to a maximum level of 50% of the value of the portfolio.
  3. Seek to maintain an Information Ratio (annualized added value relative to the index divided by annualized standard deviation of monthly added values) or 0.4 or better on a moving four-year basis.
Investment Strategies

The mandate will seek to achieve its investment objective by purchasing securities of issuers whose underlying businesses the Investment Manager believes have strong business, financial and managerial characteristics. The investment manager will determine such attributes by conducting rigorous and independent research. In addition, the purchase of these securities will generally be at a price that is less than the Investment Manager’s assessment of the underlying businesses’ intrinsic value.

Risk Tolerance & Eligible Investments
  • Maximum 30% of portfolio at market value (‘PMV”) in cash and short-term paper.
  • Leverage and short-selling of individual stocks are not permitted
  • A concentrated portfolio of 25-50 names
  • The mandate will not invest more than 10% of its Net Asset Value in any one issuer (measured at the time of investment)
Eligible Securities

Equities – Publicly listed, primarily dividend-paying equity securities (common stock, REITs, etc) or primarily Canadian and U.S. corporations.

Fixed Income – Debt securities of Canadian and U.S. governments, agencies and corporations that meet investment grade quality and have marketability sufficient for active portfolio management, including inflation-linked bonds. Private placements are not permitted.

Short-term – Canadian Treasury Bills, and short-term securities issued by Canadian financial institutions rated at least R-1 (low) or equivalent, with term not to exceed 6 months and denominated in Canadian currency.

Derivatives – Only warrants or other derivative securities acquired by virtue of an existing equity security holding are permitted; these shall be exercised or otherwise disposed of normally within three months of acquisition. Others including currency contracts whether for hedging or any other purpose are not permitted.

Sentry Philosophy

We believe all investment decisions should begin with an assessment of risk and, following disciplined analysis, should be expected to provide safety of principal over the long term as well as an acceptable return for the risk assumed.

We believe in evaluating investment opportunities as business analysts, with a focus on understanding and identifying high-quality, financially sound companies that can be purchased at a discount to their intrinsic value.

We believe in the inefficient market theory, and aim to take advantage of short-term dislocations in markets through superior analysis and knowledge of the companies in which we intend to invest. This is our analytical edge. It is achieved by emphasizing objective, independent thinking, with an investment process focused on bottom-up, company-specific research rather than macro-forecasting.

We believe great investment ideas are rare, and when investment opportunities with low risk and a high probability of success present themselves, we don’t shy away from allocating with conviction. This typically results in more concentrated portfolios that may differ in structure compared to the index and may provide less-than-commensurate risk.

We believe portfolio construction plays a crucial role in mitigating risk, and by prudently allocating capital through a careful selection of compelling business investments, we seek to deliver superior risk-adjusted returns measured over a period of years, not quarters or months.

Management Team

The portfolio will be actively managed by Sentry Investment Management.

MICHAEL SIMPSON, CFA

Senior Vice-President and Executive Portfolio Manager

Michael joined Sentry in 2002 and has more than 20 years of financial industry experience; he specializes in dividend- and income-paying securities with a focus on free cash flow to sustain reliable dividends. Michael is the lead manager of several funds including the company’s flagship fund, Sentry Canadian Income Fund, and co-manages Sentry Conservative Balanced Income Fund.

In 2014, he was named Investment Executive’s Mutual Fund Manager of the Year, which recognizes consistent outperformance over 10 years, on the basis that while one year of strong returns is not unusual, a long-term track record of outperformance is exceptional. In 2013, Michael was honoured at the Lipper Fund Awards with the inaugural Excellence in Fund Management Award, which recognizes outstanding asset managers who have delivered consistently strong risk-adjusted returns to investors, and in the opinion of Lipper’s research analysts, represent the best of the mutual fund industry. He is also a seven-time winner of a Brendan Wood International Canadian TopGun Investment Mind Award (2009, 2010, 2012, 2013, 2014, 2015/16 and 2017), given by the sell-side analyst community to those with the best grasp of the industries in which they invest and the most influence in the Canadian market. He has also received Platinum Class recognition for having received four TopGun awards in a row.

Michael graduated with a Bachelor of Arts degree from York University, and has completed both the Canadian Options Course and the Canadian Futures Course. He also holds the Chartered Financial Analyst (CFA) designation and is a Fellow of the Canadian Securities Institute.

AUBREY HEARN, CFA

Vice-President and Senior Portfolio Manager

Aubrey Hearn joined Sentry in 2005 and has more than 10 years of financial industry experience. His keen understanding of business dynamics, dedication to internal research and focus on high-quality, dividend-paying companies has led to a number of investment awards and increasing industry recognition. In 2015, he was named Investment Executive’s Mutual Fund Manager of the Year, which recognizes consistent outperformance over 10 years, on the basis that while one year of strong returns is not unusual, a long-term track record of outperformance is exceptional.

Aubrey is the lead manager of Sentry Small/Mid Cap Income Fund and Sentry U.S. Growth and Income Fund, and co-manager of Sentry U.S. Monthly Income Fund. He is also a member of the management team for the company’s flagship fund, Sentry Canadian Income Fund.

Aubrey graduated with a Bachelor of Commerce degree from Memorial University and holds the Chartered Financial Analyst (CFA) designation.