Fund Review: Global funds from iA Clarington, Manulife

Multi-asset and infrastructure offerings

Every month in my Top Funds Report newsletter, I write a summary of my views about specific funds and fund companies based on queries from readers. These are often funds that have undergone management changes or that are new issues, a little less well known, or not as widely covered as some of the high fliers. This month I want to take a look at a couple of global offerings, one from iA Clarington and one from Manulife.

iA Clarington Global Multi-Asset Fund

Last June, iA Clarington announced that PineBridge Investments would take over the management duties of this fund (which was then named iA Clarington Global Growth and Income Fund), replacing Radin Capital Partners. Under Radin, the fund was a balanced fund with an equity focus.

The equities were managed using Brad Radin’s fundamentally-driven, bottom-up, value-focused approach. He invested in a mix of mid- and large-cap companies around the world. The fixed-income sleeve was tilted to the high-yield side of the spectrum and was predominantly in U.S. issues.

Unfortunately, the value bias of the fund had hurt its relative performance over the past few years, as the higher-flying, higher-beta names were driving most of the market gains. Under the new management team, the fund took on a more multi-asset approach that will strive to be more adaptive to market conditions.

PineBridge is an Asian-based global asset manager with offices in 17 countries around the world. The firm has more than $85 billion in assets under management and employs more than 200 investment professionals. In addition to the new management team, the fund was renamed the IA Clarington Global Multi-Asset Fund.

PineBridge’s process uses a mix of top-down asset allocation combined with fundamental, bottom-up security selection. They employ an absolute-return framework that targets a rate of return set at the consumer price index plus five percentage points over a rolling five-year period.

Their top-down allocation process uses a mix of both long- and short-term outlooks in setting the asset mix. The managers look at their five-year view on the various asset classes and overlay that with their 9- to 18-month outlook. This then allows them to optimize the mix for the best risk-reward tradeoff. Once that mix is set, they can use their fundamental security selection process to implement the portfolio

The managers have a significant amount of flexibility around the asset mix. Equities and fixed income will typically range between 20% and 80%, while cash can range between 0% and 45%. There is also an alternative sleeve that can be as high as 25%.

I expect this to be a positive development for the fund, resulting in better risk-adjusted returns, and a less volatile return stream.

While PineBridge’s approach has been implemented in other strategies around the world, I will still want to see a few quarters of real track record for this fund to better assess how the strategy works in the Canadian market.

Manulife Global Infrastructure Fund

The fund is managed by Brookfield Investment Management, one of the preeminent players in the global infrastructure space, which is why I like this fund as a way to access infrastructure. However, its exposure to pipelines and utilities has held it back. Pipelines have struggled for the past few years, selling off hard in the aftermath of the oil price collapse in 2015 and 2016. The sector has faced headwinds again recently as the regulatory environment continues to cause challenges, with Canadian federal and provincial governments squabbling over whether to allow any new pipelines to be built at all.

Another headwind for the fund is its overweight exposure to sectors that have a high degree of sensitivity to interest rates, such as utilities. With interest rates on the rise, utilities are often viewed as bond proxies and are impacted by movements in rates. The fund has recovered somewhat over the past 12 months, posting a return of 13.0% to Feb. 28, considerably above the category average of 7.5%, and placing it in the top-10 performance ranking for the category. While I am closely watching this fund, I am not yet prepared to make a change.

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

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.