Fund in Focus: Manulife Monthly High Income Fund

Delivering performance with balance

Co-managed by Alan Wicks and Jonathan Popper, the Manulife Monthly High Income Fund has long been a favourite of mine. The fund has been a consistent winner of the annual FundGrade A+® Award, and currently has a FundGrade A rating for October. The fund’s equity approach is rooted in a value philosophy that looks for businesses that generate high and sustainable profits and that are trading at attractive valuations. Each investment candidate is scored on a number of fundamental factors. A deeper due diligence review then includes meetings with management and generating an estimate of fair value.

The managers next determine appropriate buy and sell prices. And position sizes are actively managed based on real-time valuation levels. While this seems to imply a lot of trading, turnover levels have averaged a modest 62% over the past five years.

The fixed-income sleeve is managed using a combination top-down economic review and bottom-up credit analysis, focusing on sector allocation, credit quality, and individual credit selection. The managers also actively manage the yield curve and duration exposure.

Longer-term performance numbers have been excellent, with a 5-year average annual compounded rate of return of 5.0% to Oct. 31, and a 10-year annualized return of 7.5%, both of which handily outpace the category average. However, like most, the fund struggled in 2018, falling 5.7% for the year. This year has seen a turnaround, however, with the fund gaining 11.3% year to date compared with the category average of 10.5%.

The equity sleeve of the portfolio has a slight growth tilt, and that has helped boost fund performance this year. The fixed-income sleeve is weighted 55.8% to investment-grade corporate bonds, which have returned 8.6% year to date to Oct. 31, as measured by the benchmark FTSE Canada All Corporate Bond Index.

The fund has also done an excellent job at protecting capital in down markets, participating in about 70% of downside over the past five years, while delivering more than 100% of the upside.

This remains an excellent balanced fund for most investors.

Manulife Monthly High Income Fund
Fund company: Manulife Investments
Fund type: Canadian Neutral Balanced
FundGrade: A (October)
FundGrade A+ Awards: 2014-2018
Style: Large-Cap Growth
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Excellent
Managers: Alan Wicks and Jonathan Popper
MER: 2.02%
Fund code: MMF583 (Front-end load)
Minimum investment : $500

Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.

Notes and Disclaimer

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.