Balanced funds that held up under pressure
What we're looking at
Amid tense financial market conditions, balanced funds remain the most popular choice of investors by far. The mix of stocks and bonds in these funds clearly offers some comfort. But which Canadian balanced funds have managed the financial market volatility of the past few years the best? For answers, let's consult the independent mutual fund analyst Dave Paterson of D.A. Paterson & Associates Inc.
Mr. Paterson says his focus in evaluating funds is their ability to manage volatility. For this screen, he applied two measures:
Standard deviation: Shows how much variation there is in a fund's monthly gains and losses; only funds with a five-year standard deviation of less than 12 made the list (the lower the number, the better).
Sharpe ratio: Adjusts returns for the amount of risk being taken on; funds presented here have a five-year ratio of more than 0.13 (the higher the ratio - devised by economist William Sharpe - the better the blend of risk and return).
Other factors built into this screen: Management expenses ratios had to be below 2.25 per cent, fund-of-fund products were excluded and upfront investment requirements had to be $25,000 or less. Note: GBC funds have a $100,000 minimum, but Mr. Paterson said a $10,000 minimum applies when the company's funds are bought through an investment dealer rather than direct from GBC.
What we found
There are three different categories of Canadian balanced funds - one with an emphasis on stocks, one with roughly equal amounts of stocks and bonds and one that mainly holds bonds. Given how bonds have outperformed stocks over the past five years, it's not surprising that this latter category produced the most funds in our screen results. Looking ahead, balanced funds with an emphasis on stocks would be best positioned for an economic rebound and stronger stock market conditions.
FUNDS THAT FIGHT VOLATILITY
|Total||Min.||5 Yr||5 Yr.|
|Asset||Invst.||Standard||Sharpe||Returns to June 30 (%)|
|Fund||Category||MER (%)||($ Mil.)||($)||Deviation||Ratio||YTD||1 Year||2 Year||3 Year||5 Year||10 Year|
|FMOQ Monthly Income||Cdn Equity Bal||1.0||147.4||500||9.3||0.29||0.4||0.6||6.8||9.5||3.9|
|GBC Growth and Income||Cdn Equity Bal||1.7||33.3||10,000||11.0||0.20||6.0||5.7||14.2||14.6||3.1|
|Middlefield Income Plus A||Cdn Equity Bal||2.0||82.5||1,000||8.9||0.62||1.6||1.5||6.8||11.6||6.9||9.4|
|TD Monthly Income I||Cdn Equity Bal||1.5||5,956.4||100||10.1||0.18||2.5||2.0||7.5||9.4||2.9||8.3|
|Caldwell Income||Cdn Fixed Inc Bal||1.3||14.3||500||4.1||0.52||1.9||-1.1||2.4||3.8||3.7||3.7|
|Fidelity Income Allocation B||Cdn Fixed Inc Bal||1.8||972.5||500||10.6||0.40||2.7||5.8||9.4||14.2||5.4|
|HSBC Monthly Income Inv||Cdn Fixed Inc Bal||1.5||816.2||500||5.5||0.21||2.6||-0.3||4.0||5.2||2.6|
|Mac Sentinel Income A||Cdn Fixed Inc Bal||1.9||1,392.6||500||5.6||0.22||1.4||2.7||5.5||6.3||2.6||5.0|
|Manulife Structured Bond Class||Cdn Fixed Inc Bal||1.7||67.2||500||4.3||0.70||2.3||4.7||4.9||6.3||4.6|
|SEI Income 20/80 Class P||Cdn Fixed Inc Bal||1.9||83.8||1,000||4.5||0.48||1.8||3.8||5.3||5.8||3.7|
|SEI Income 30/70 Class P||Cdn Fixed Inc Bal||2.1||48.9||1,000||5.5||0.20||1.8||2.5||5.2||5.6||2.5|
|Steadyhand Income||Cdn Fixed Inc Bal||1.0||66.9||10,000||5.6||0.94||3.6||7.2||8.6||10.9||7.0|
|BMO Monthly Income||Cdn Neutral Bal||1.6||4,733.8||500||7.2||0.17||0.8||0.4||5.9||6.6||2.5||5.3|
|Fidelity Canadian Balanced B||Cdn Neutral Bal||2.1||6,691.0||500||9.5||0.20||1.6||-0.6||6.6||7.5||3.0||6.6|
|Fidelity Monthly Income B||Cdn Neutral Bal||2.1||6,386.5||500||8.7||0.38||3.3||3.9||9.8||11.9||4.6|
|RBC Monthly Income||Cdn Neutral Bal||1.2||8,119.1||500||7.0||0.32||2.1||2.2||6.7||7.3||3.6||7.3|
|Source: D.A. Paterson & Associates Inc.|