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Balanced mutual funds give investors a way forward in volatile markets

Rated highly by Morningstar, Mackenzie’s offerings combine the lower volatility of a balanced portfolio with long-term growth potential


Date: November 17, 2016

Ask Mackenzie Investments vice-president Kristi Ashcroft to describe today’s investing landscape, and she’s the first to admit that we’re in uncharted territory.

With trillions of dollars of negative-yielding global debt and low interest rates boosting asset prices, generating the income and total return that investors are looking for will be challenging.

For Ms. Ashcroft, this uncertain environment is exactly why traditional balanced mutual funds – which typically combine stocks, bonds and sometimes a money market component – make sense for many Canadians now.

Seeking an investment vehicle that mixes some protection from volatile markets with income and modest capital appreciation over time? A balanced fund with a proven track record can tick all of those boxes.

“At Mackenzie, we aim to marry the art of stock picking with the science of portfolio construction in order to deliver consistent outperformance,” says Ms. Ashcroft, the firm’s senior investment director for fixed income.

Portfolio managers at Toronto-based Mackenzie conduct deep fundamental research to create low-turnover portfolios consisting of high-conviction stocks and bonds that offer a margin of safety when markets top and drop.

It’s an approach that works for the independent, holistic asset management firm, which turns 50 next year. Mackenzie offers a full range of portfolio solutions that include exchange-traded funds, pension-style managed solutions, a Registered Disability Savings Plan and its popular balanced mutual funds.

Many of the firm’s balanced funds carry four-and five-star ratings from Morningstar, Inc. “Our recipe for success has translated into results,” Ms. Ashcroft says. “It’s not only what we do, but it’s what we do well.”

Michael Schnitman, senior-vice president and head of product at Mackenzie, explains that one of its biggest advantages is the diversity of funds it offers.

“We have a variety of balanced funds in every major balanced fund category, and these can be selected to match well with an investor’s time horizon, risk tolerance and financial goals,” Mr. Schnitman says.

Take the $1.2-billion Mackenzie Income Fund, which launched in 1974 and is a popular choice of more risk-averse, senior investors who are at or near retirement age.

Comprising roughly 30 per cent equities and 70 per cent fixed-income securities and cash, the Canadian-focused four-star fund has a long track record of steady income generation and performance for the asset-preservation crowd. It’s “exactly what investors in that type of demographic require,” Ms. Ashcroft says.

Two of Mackenzie’s funds in the neutral balanced category – the $1.7-billion Strategic Income Fund and the $791-million Global Strategic Income Fund – offer an asset allocation mix of 50 per cent equities and 50 per cent fixed income.

Both invest in a diverse portfolio of dividend-paying stocks and tap into a range of investment-grade and higher-yielding bonds to generate income. The funds’ experienced teams rely on deep fundamental research to find investments that they feel offer attractive return potential at an appropriate price for the risk.

Then there are the equity-oriented balanced funds managed by Mackenzie’s Ivy team: the $1-billion Ivy Global Balanced Fund and the $1-billion Ivy Canadian Balanced Fund, for those seeking low-volatility, high-quality investing. Think risk-adjusted returns and an opportunity to beat the index during down markets.

For younger or less risk-averse investors, the five-star, $574-million Mackenzie Canadian Growth Balanced Fund includes just enough fixed income to help them sleep at night when markets take a dive, while offering more potential for capital growth.

Although Mackenzie is proud of its lineup of traditional balanced funds, the firm also believes it plays a key role in developing innovative solutions to address the new challenges that investors face. “The Mackenzie Monthly Income Portfolios launched in 2014 were designed with explicit downside protection to deliver the income and the lower volatility that retirees in the decumulation phase of investing are seeking,” Mr. Schnitman says.

In other words, there’s a balanced fund for everyone who believes in long-term investing versus short-term trading.

What’s more, because they’re the ultimate set-and-forget investment, balanced funds can keep Canadians from making poor timing decisions. For instance, someone who holds individual equities and bonds might be tempted to sell their stocks too quickly during a downturn.

But in a balanced fund, stocks and bonds are packaged up together. The combined numbers often look less daunting in a bear market, so investors are more likely to sit tight. “They don’t have to make those emotional decisions on a stock-by-stock basis or worry about getting in and out of the market,” Ms. Ashcroft notes.

To decide which balanced fund is the best fit, advisors should look at how each fund’s asset allocation is determined and the portfolio’s overall risk profile. For their part, investors should talk to an advisor about when they will eventually need the money and how much risk they can realistically take on.

“Investing is deeply personal,” Ms. Ashcroft says. “Our portfolio managers come to work every day knowing the decisions that they’re making are tied very directly to these personal, financial goals of our investors. We really see ourselves as partners and in it for the long haul.”

Sponsored by Mackenzie Investments

Commissions, trailing commissions, management fees, brokerage fees and expenses all may be associated with investment funds. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently, and past performance may not be repeated.

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