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Mutual Fund News

Seeking some balance in balanced funds

rcarrick@globeandmail.com

WHAT WE'RE LOOKING AT

Cheap-to-own balanced funds, which are the most popular category of mutual fund right now.

OUR SCREEN

There are three variations of balanced funds - equity-focused, neutral and fixed income-focused. We considered all mainstream funds in these categories with management expense ratios (MERs) of less than 1.5 per cent, and then ranked them from the largest size on down. The average MER for Canadian balanced funds is about 2.4 per cent.

MERs are your best measure of how much it costs to own a fund. They gather almost all the expenses associated with running a fund and express them as a percentage of assets. Published fund returns have had fees deducted.

WHAT WE FOUND

Plenty of cheaply priced options for the many investors who like the idea of buying a fund that balances holdings in both stocks and bonds. The big banks dominate the list with a selection of monthly income funds that have done very well over the past five years.

Come to think of it, every fund on our list is in the first or second quartile over the past five years, and the same goes for all but a few names in the past three years. Who says low fees aren't your friend? Quartiles, by the way, are a way of dividing funds in a category into four groups according to their returns. First quartile is tops, fourth is the dregs.

Investors bought almost $21-billion worth of balanced funds in the past 12 months on a net basis (purchases minus sales), which makes them by far the favourite category of mutual fund. Some in the fund industry react to high demand with high fees. Don't be suckered. Fees are crucial with balanced funds because they have substantial bond holdings. Interest rates are still low these days by historical standards, which means you can't afford to have high fees eroding your returns.

Check your balanced fund MERs, and then look at the value you're getting in the form of returns. If there's an imbalance, today's Number Cruncher can help you find alternatives.

*****

Balanced Funds with MERs less than 1.5%
Fund nameCategoryAssets ($-mil)MERQuart 1YRQuart 3YRQuart 5YR
RBC Monthly IncomeCanadian Neutral Balanced7,153.61.14311
CIBC Monthly IncomeCanadian Neutral Balanced6,432.91.42321
BMO Monthly IncomeCanadian Neutral Balanced4,980.51.49211
TD Monthly IncomeCanadian Equity Balanced4,443.61.40111
MD DividendCanadian Equity Balanced1,349.31.44221
Beutel Goodman BalancedCanadian Equity Balanced1,304.91.16322
Scotia Diversified Monthly IncomeCanadian Neutral Balanced1,187.01.3811
Quebec Professionals BalancedCanadian Fixed Income Balanced833.81.08232
PH&N Balanced-DGlobal Neutral Balanced773.80.87221
FÉRIQUE BalancedCanadian Neutral Balanced561.20.79232
MD BalancedCanadian Equity Balanced468.91.45121
FMOQ OmnibusCanadian Neutral Balanced445.70.95222
PH&N Balanced Pension Trust-DCanadian Neutral Balanced403.50.56132
McLean Budden Balanced Growth DGlobal Neutral Balanced225.20.95321
HSBC Monthly Income-ICanadian Fixed Income Balanced224.41.46122
Integra BalancedGlobal Neutral Balanced195.51.12321
Mawer Cdn. Balanced RSPGlobal Neutral Balanced187.61.01311
Compass Conservative PortfolioCanadian Fixed Income Balanced140.51.41111
FMOQ InvestmentCanadian Neutral Balanced131.10.95322
Standard Life Monthly Income-LCanadian Neutral Balanced95.21.17211
Mawer Cdn. Diversified Investm'tGlobal Equity Balanced87.91.02311
Quebec Professionals Balanced GwthGlobal Neutral Balanced79.51.11332
FMOQ Monthly IncomeCanadian Equity Balanced65.70.9521
Leith Wheeler BalancedGlobal Equity Balanced60.21.18311
National Bank Monthly Conserv IncCanadian Fixed Income Balanced52.11.4011
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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