Last week, Fundata Canada announced the 2012 winners of the FundGrade® A+ Ratings™, a small, exclusive group of mutual funds and ETFs that comprise the best of the best in Canada. Balanced funds, whose portfolios consist of some mixture of fixed-income and equity assets, performed particularly well, garnering several FundGrade A+ Ratings awards for 2012. Here’s a summary of some of the A+ mutual fund winners in the balanced fund categories.
Canadian Fixed Income Balanced
The Compass Portfolio Series had another banner year with four FundGrade A+ Rating funds in 2012, including two repeat winners in the Canadian Fixed Income Balanced category. Compass Conservative Balanced Portfolio and Compass Conservative Portfolio, both managed by ATB Investment Management Inc., earned 9.9% and 8.3%, respectively, this past year. The Conservative Balanced Portfolio is slightly more aggressive holding, with around 40% equity compared with the Conservative Portfolio, which is closer to 20%. Both funds have a front-end sales charge and require a minimum investment of $1,000. The MERs are just 1.38% for the Conservative Portfolio and 1.69% for the Conservative Balanced.
Fidelity Income Allocation Fund is another 2012 FundGrade A+ winner in the Canadian Fixed Income Balanced category. This first-time A+ winning fund debuted in 2005 and is managed by Pyramis Global Advisors. The target asset mix for the portfolio is 30% equity and 70% fixed income. Much of the exposure is gained by investing in underlying Fidelity mutual funds, such as the Fidelity Canadian Bond Fund, Fidelity Dividend Plus Fund, and Fidelity American High Yield Fund. In 2012 the fund gained 5.4%, and over the past 5 years has made an average annual compound return of 6.4%. The fund can be bought with a variety of load types, with a minimum initial investment of just $500. The MER is 1.98%.
Canadian Neutral Balanced
RBC Monthly Income Fund is another first time FundGrade A+ winner for 2012 is the. This fund is one of the best and most consistent performers in the Canadian Neutral Balanced category. In fact, it has lost value in only one of the past 10 calendar years. It earned 6.8% during the past year and is up 6.5% and 4.3% on a 3-year and 5-year compound basis respectively.
What really sets this fund apart is the low volatility. The 3-year annualized standard deviation is just 3.8% compared with the category average of 5.6%. Around half of the portfolio is made up of fixed-income securities, and cash sits at just over 7%. The remaining equity portion consists mainly of large, dividend-paying companies, such as Toronto-Dominion Bank (TSX: TD), Royal Bank of Canada (TSX: RY), and Bank of Nova Scotia (TSX: BNS). Financial services make up around 40% of the equity holdings, by far the most heavily weighted sector. The fund is no-load and can be bought with a minimum investment of only $500. The MER is a very reasonable 1.19%.
Bissett Focus Balanced Corporate Class was also awarded a FundGrade A+ Rating for 2012 in the Canadian Neutral Balanced category. The fund debuted in 2009 and since then has been one of the top-performing funds in the category, making 6.3% in 2012 and 6.1% on an average annual compounded basis over the past 3 years.
Managed by Jason Hornett, security selection is largely based on quantitative metrics, using Bissett’s proprietary model that looks at fundamental indicators to quickly identify securities with the potential for price appreciation. The result is fairly diversified portfolio with an asset mix of roughly 60% equity and 40% bonds. The MER sits at 2.4%, and the risk rating is “Low to Medium.”
Canadian Equity Balanced
Norrep Income Growth Class continues to dominate the Canadian Equity Balanced category. A FundGrade A+ winner in 2011, managers Alex Sasso and Keith Leslie helmed the fund to a second A+ Rating in 2012, with a solid calendar return of 12.6%. The 3-year average annual compound return now sits at 15.1%, best among its peers.
The fund invests mainly in small and mid-cap Canadian dividend-paying equities but holds at least 10% of the portfolio in high-yielding bonds. The portfolio is heavily weighted in industrials, around 35%, and top holdings include Black Diamond Group Ltd. (TSX: BDI), Transforce Inc. (TSX: TFI), and K-Bro Linen Inc. (TSX: KBL).
The fund’s MER is currently 4.15%, which includes a performance fee of 20% of the excess return over the market index, subject to certain high-water marks. This may seem a bit steep, but despite this fee, the fund has earned its investors an average annual compound return of 9.5% since inception at the beginning of 2006. The fund has a monthly distribution target of $0.06 per share and requires a minimum investment of $5,000.
Brian Bridger, CFA, FRM, is Director, Analytics & Data, at Fundata Canada Inc. and is a member of the Canadian Investment Funds Standards Committee.
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Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.