It’s not very often I’ll talk about some closed-end fund on the TSX Venture Exchange (which is basically the trailer park of North American stock exchanges), but the Pender Growth Fund is actually pretty interesting.

The Fund

The Pender Growth Fund (TSXV:PTF) isn’t like the average mutual fund. It doesn’t simply buy stakes in publicly traded companies. I’ll let the fund’s website do the explaining for me. No, you’re lazy.

Pender Growth Fund is a closed-end investment fund invests in opportunities identified by the Pender Investment team. The Fund aims to uncover unique investment situations in small but profitable companies, often in the technology sector. We invest in both public and private companies and look to invest in businesses that have hit an inflection point.

The Fund has invested in a number of publicly listed companies with an emphasis on established businesses requiring capital for growth, expansion or restructuring. In each situation, the Fund’s capital has been invested to improve the equity value of the company.

This results in, uh, some interesting holdings. A real list of blue chips right here.

Is that the worst Photoshop you’ve ever seen? Probably!

The joke was a crime against humanity too.

Uh, Italics Man?


This is Nelson’s mom. You’ve made him cry and he’s not coming back until you apologize.

Finally. All my dreams have come true.

You’ve also probably noticed the size of the fund by now. With just over $17 million in assets, the Pender Growth Fund is basically a rounding error when compared to most mutual funds. Even when looking at the closed-end variety, which are usually not big.

The size actually works to the fund manager’s advantage, since he’s not forced to make a whole bunch of investments to get all the capital invested. Remember, these are tiny companies Pender is investing in. They’re not putting much more than $1 million to work in any one of these organizations.

One note before we move onto how well this fund has done. It charges a big management fee. You’re looking at a 2.5% fee taken off the top every year, and the manager is taking an additional 25% of the profits on any returns past 6% annually. So if the fund returns 10%, the manager gets 3.5% of that. Some people might consider that a bit excessive.


Let’s put up a chart comparing the Pender Growth Fund to the TSX Composite Index (as represented by XIC, the ETF that tracks that index).

You see that red line that hasn’t done anything? You probably assumed it’s just symbolizing where zero is. No, it’s not. That’s the TSX Composite performance, which is up a little over 30% in the last decade. The Pender Growth Fund is up 2,553%.

To put it another way, the Pender Growth Fund went from $0.13/share a decade ago to $3.32 today. It’s actually down considerably from its 52-week high, which flirted with $5.

And that’s after those terrible management fees. Absolutely bananas.

You forgot all about the management fees once you saw those returns, didn’t you?

Should you buy the Pender Growth Fund?

Can the fund’s manager, David Barr, continue his glorious success with the Pender Growth Fund? That’s ultimately what this comes down to.

It has a few things going for it. With a current market cap of approximately $14 million — the fund’s value has gone down since it posted those top holdings — there’s still plenty of room left for growth. Barr is also portfolio manager of the Pender Small-Cap Opportunities Fund, another mutual fund that has absolutely crushed the market despite its high fees. You might argue he knows what he’s doing.

It’s hard to analyze the underlying holdings in a fund like this one. We’re putting a lot of faith in Barr and his team. These folks have performed in the past, but as we all know past performance doesn’t really mean squat going forward. Still, it’s obvious the people at Pender are good investors.

Finally, we have to remember there really aren’t many ways to get this kind of exposure in your portfolio. The Pender Growth Fund is akin to venture investing, something the rest of us can’t really access. Even if we could, I doubt we’d do a very good job at it. So it makes sense to have Pender doing it for us.

Ultimately, I don’t hate the set-up as it stands today. Sure, Pender gets paid generously when the fund performs well. But that’s okay, since their incentives are aligned with mine. They want the value to go up just as much as I do.

I don’t own this fund currently and probably won’t buy it because I lean dividend investing these days, but it’s interesting.

Tell everyone, yo!