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Balanced global funds that pack a punch


Global neutral balanced funds don't exactly sound sexy, but investors don't mind.

It was the top selling fund category for each of the first three months of this year, according to the Investment Funds Institute of Canada. Let's check out how these funds, which invest in stocks and bonds, have done recently. This includes managing through the 2008-09 meltdown.


We screened for the best performers over five years among global neutral balanced funds. This group must invest less than 70 per cent of total assets in Canadian stocks or Canadian-dollar bonds. U.S. dollar, segregated, duplicated versions, and funds without a five-year record were excluded.


While many in this group are actually funds invested in other funds, the leader is a balanced fund run with a contrarian bent.

Dynamic Value Balanced rose to the top of the five-year heap with an average annual return of 7.2 per cent. Its return is well above the 2.1-per-cent peer-group average.

The performance comes from "finding unloved, uncovered names that might not fall on anybody else's radar screen," says manager David Taylor of Goodman & Co. Investment Counsel.

He currently holds Osisko Mining, HudBay Minerals, Arch Coal and Eldorado Gold. "These are big positions in the fund," he said. "My competitors wouldn't own these in a balanced fund."

Mr. Taylor, who is better known for running the Dynamic Value Fund of Canada, is not afraid to sit on a ton of cash when markets are expensive. Going into the 2008 market meltdown, the fund had about 17 to 20 per cent in cash. But in March, 2009, when markets bottomed, "this fund was 100 per cent invested for the first time ever," said Mr. Taylor, who has run the balanced fund since 2003.

One significant move took place when the price of oil was trading at about $145 (U.S.) per barrel and natural gas was trading at about $13 per million British thermal units in 2008.

"I was 11 per cent in energy in the fund," he recalls. "When oil went down to $39 [per barrel], this fund took it up from 11 to 32 per cent, which was very contrarian."

He's been aggressively buying natural gas stocks. "I suspect that a year from now, everyone is going to be doing the same."

Even the 25 per cent fixed-income portion of the fund differs from most of its peers. That portion, which is invested in high-yield debt, is run by Barry Allan of Marret Asset Management, who also oversees the Dynamic High-Yield Bond fund. "Right now, it is totally high yield, but if rates start to rise and we think the economy is going to start to weaken, we can go into treasuries or lower-risk fixed income," he said.


Top performers among global neutral balanced funds over five years
(As of Mar. 31) Latest % rtn (Mar. 31) % rtn
NameAssets ($-mil) MER 5-yr YTD 2009 2008 2007 2006 2005
Dynamic Value Balanced1,451.42.367.21.140.4-21.2-0.812.116.5
CI Signature Income & Growth3,066.72.315.81.927.6-21.21.812.714.7
Dynamic Strategic Growth Portfolio144.92.475.42.924.8-22.54.613.412.4
CI Signature High Income3,575.61.524.92.930.6-
Lincluden Balanced-O1.994.72.316.6-9.7-1.813.05.5
Mawer Cdn. Balanced RSP187.
McLean Budden Balanced Growth D225.20.954.00.817.2-17.01.312.610.2
Marquis Balanced Growth Portfolio137.52.623.92.024.0-21.73.310.38.7
Integra Balanced195.
Compass Balanced Portfolio435.71.943.82.617.7-15.7-1.512.08.0
Mackenzie Cundill Cdn Balanced 'C'1,330.32.383.55.920.7-17.6-
PH&N Balanced-D773.80.873.41.619.3-18.2-0.511.59.1
McLean Budden Balanced Value D19.90.953.30.513.5-13.2-0.710.49.5
CI Portfolio Series Conservative746.
BMO Intuition RESP Balanced Port3.01.09.7-
BMO MatchMaker Strat Balanced Port3.01.09.7-
KEYSTONE Long-Term Growth128.72.692.91.716.2-20.93.710.38.5
RBC Select Balanced5,809.61.852.91.012.6-18.42.411.010.5
KEYSTONE Inv Cons Income & Gwth1.62.662.81.812.7-
Mackenzie STAR Inv Bal Gw & Inc9.82.302.82.411.4-
KEYSTONE Cons. Income & Growth14.12.672.72.114.0-13.0-
CI Portfolio Series Conserv Bal562.42.342.71.515.7-16.0-2.310.68.6
BMO NB Growth Portfolio2.61.220.9-29.72.816.512.6
KEYSTONE Inv Balanced Gwth & Inc3.22.762.62.216.0-
Quotential Balanced Growth Pt2,
Mackenzie STAR Inv Max Long-Term Gw5.12.482.61.814.4-19.61.611.87.2
Mackenzie STAR Cons Inc & Growth19.
Quebec Professionals Balanced Gwth79.
KEYSTONE Bal Growth & Income50.62.722.52.515.6-17.1-0.310.65.3
Mackenzie STAR Inv Cons Inc & Gw12.
DEX Universe Bond Total Return Index5.
average for global neutral balanced group 2.11.718.2-19.7-1.510.15.8
MSCI World ($ Cdn)-0.10.311.8-26.1-
S&P/TSX Total Return7.43.135.1-33.09.817.324.1
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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