Income stability is key with A-Grade Leith Wheeler Income Advantage Fund
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By Dave Paterson  | Wednesday, January 10, 2018


 



Those investors looking for a stable source of tax-efficient monthly income with the potential for some capital growth may want to consider the Leith Wheeler Income Advantage Fund. Over the past five-years, the no load units of this fund have generated an average annual compounded rate of return of nearly 6.3%, placing it in first-quartile performance, and handily outpacing both the index and its Canadian Fixed Income Balanced peer group. The fund achieved a FundGrade A Grade in November, and won a FundGrade A+® Award for 2013.

The fund invests in a mix of bonds, preferred shares, and dividend-paying stocks. It has a lot of flexibility and can invest in companies of any size. It also has the flexibility to explore opportunities outside of Canada. Allocations are quite flexible, with managers able to adjust fixed-income holdings anywhere between 30% and 70% of the portfolio, Canadian equities between 15% and 50%, foreign equities up to 25%, preferred shares up to 25%, mortgages up to 10%, and cash and cash equivalents up to 5%.

The fund is generally a more conservative option, and managers will typically favour fixed-income investments. According to the fund’s most recent fact sheet dated Sept. 30, 2017, it held 55% in bonds, 8% in preferreds, 2% in cash, and the balance in equities. The majority of the equity exposure will be through holding units of the highly-regarded Leith Wheeler Canadian Dividend Fund Series A, which uses a fundamental, bottom-up, value-focused approach to find higher-yielding dividend stocks. Foreign exposure of the fund is limited to a maximum 25%, although given the focus on tax-advantaged income, most of the equity exposure is likely to be Canadian.

The fixed-income sleeve will be a mix of investment grade and high yield. At the end of November, about 58% of the fixed-income holdings were rated A or better, while high yield represented approximately 38%.

The drawback to this fund is that it has been slightly more volatile than the peer group over the past 3- and 5-year periods. Even with the higher volatility, however, the fund has outpaced its competition on a risk-adjusted basis.

Bottom line, this can be a great balanced fund for those looking for a good mix of tax-advantaged returns and capital gains.

Leith Wheeler Income Advantage Fund
Fund company: Leith Wheeler Investment Counsel
Fund type: Canadian Fixed Income Balanced
FundGrade Rating: A (November)
FundGrade A+ Award: 2013
Style: Blend
Risk level: Low to Medium
Load status: No Load
RRSP/RRIF suitability: Excellent
Manager: Leith Wheeler Investment Team
MER: 0.85%
Fund code: LWF017 (no load)
Minimum investment: $25,000

Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due diligence on a variety of investment products. He is also the publisher of Dave Paterson’s Top Funds Report, offering regular commentary and in-depth analysis of Canada’s top investment funds. He uses a unique analytical approach to identify funds with strong, risk-adjusted returns, and regularly publishes his insights and analyses in Fund Library.

Notes and Disclaimer

© 2018 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

Commissions, trailing commissions, management fees and expenses all may be associated with 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. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.

 

   
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