Co-managed by Alan Wicks and Jonathan Popper,
Manulife Monthly High Income Fund
has long been a favourite of mine, and a perennial winner of the annual FundGrade A+® Award. But it
had been closed to investors since August 2015. However, Manulife reopened
it to new investors this past January, as management believes they can
effectively implement their process at the current $8.9 billion in assets
under management (AUM) for all classes of the fund combined.
For the equity space, the managers use a bottom-up, fundamentally-driven
process that seeks out businesses of any size with high returns on invested
capital. Each investment candidate is scored on a number of fundamental
A deeper due diligence review then includes meetings with management and
generating an estimate of fair value. Buy and sell prices are also
determined, and position sizes are actively managed based on real-time
valuation levels. Surprisingly, turnover levels have averaged a modest 70%
for the past three years.
The fixed-income sleeve is managed using a combination top-down economic
review and bottom-up credit analysis. The fund aims to generate returns by
focusing on sector allocation, credit quality, and individual credit
selection. Managers aim to mitigate risk with active management of the
portfolio’s yield curve and duration exposure.
At the end of July, roughly 32% of the portfolio was in bonds, 13% in cash,
and 54% in equities (with the bulk, about 72%, in Canada and 23% in the
Performance has been excellent, with the fund delivering an impressive
5-year average annual compounded rate of return of 7.7% to July 31, handily
beating both its index and peer group. Volatility numbers have been lower
than the index and peers, and the managers have done an excellent job
protecting capital in down markets. Still, the way the portfolio is built,
there will be periods when it lags, which is what happened in 2016, when it
trailed the index and peer group.
This is a strong balanced offering, and remains one of my favourites. While
the managers have sufficient runway to implement their strategy with the
current AUM, I will continue to monitor the fund closely for any erosion in
the risk-reward profile, particularly if inflows are robust.
Manulife Monthly High Income Fund
Canadian Neutral Balanced
FundGrade A+ Awards:
Large Cap Growth
Risk level: Medium
Alan Wicks and Duncan Anderson since Sept. 1997
MMF583 (front-end load)
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
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.
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amount of your investment in the fund will be returned to you. Fund values
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only and is not intended as personalized investment advice.