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Mutual Fund News

A fund-of-funds approach, with a twist

What we're looking at

Occasionally over the past several months, we've used this space to look at mutual funds offered by small, low-profile companies that don't get a lot of exposure.

This week brings another instalment of this exercise, starting off with a twist.

Our focus is the Meritage lineup from National Bank Mutual Funds, which is one of the largest fund groups in the country.

Our screen

Meritage products are built on the fund-of-funds idea, which means each holds a small basket of best-of-breed funds from other companies.

Products like these are of no great merit in general, but National Bank has done some interesting things with Meritage.

First, complete objectivity in the selection of the underlying funds has been ensured by only using third-party funds.

No National Bank funds are used. Also, several funds from competing bank fund families are included (examples: TD Canadian Bond, RBC Canadian Dividend).

Funds are selected for inclusion on the basis of performance and the quality and consistency of their managers.

The funds presented here are ranked by assets.

To assess their performance, we've presented their quartile rankings over the past three years (the funds aren't old enough for a longer-term view).

Quartiles divide funds in a category in four groupings - a ranking in the first and second quartiles is what you want to see as an investor.

What we found

It should be noted upfront that Meritage portfolios are expensive.

Expect to pay the fees of the underlying funds, plus a markup.

Meritage Balanced Portfolio has a management expense ratio of 2.34 per cent (that's underlying funds plus any markup).

There are good competing funds from companies such as RBC, CIBC, Dynamic and Fidelity that have MERs of 1.14 to 2.06 per cent.

Still, our screen shows that Meritage portfolios have almost exclusively turned in first-quartile rankings in the past three years.

Take Meritage Balanced Portfolio, for example.

It has consistently provided above average results with lower than average volatility, and its loss in 2008 of 12.9 per cent was comparatively mild.



Fund nameAsset CategoryAssets ($-mil) (as of Nov. 30)LatestMER3-yearQuartile3-year AverageAnnual Return (%)
Meritage Balanced PortfolioCanadian Neutral Balanced212.92.3413.8
Meritage Balanced Income PortfolioCanadian Neutral Balanced132.02.3513.7
Meritage Conservative Income PortCanadian Fixed Income Balanced129.72.0815.0
Meritage Growth PortfolioCanadian Neutral Balanced114.72.3412.9
Meritage Global Equity PortfolioGlobal Equity91.82.611-2.2
Meritage Equity PortfolioGlobal Equity Balanced80.52.6011.7
Meritage Conservative PortfolioCanadian Fixed Income Balanced56.52.0914.4
Meritage Moderate PortfolioCanadian Fixed Income Balanced45.22.0913.8
Meritage Equity Income PortfolioCanadian Equity Balanced42.22.6012.3
Meritage Canadian Equity PortfolioCanadian Equity41.42.6010.5
Meritage Moderate Income PortfolioCanadian Fixed Income Balanced36.52.0814.3
Meritage Growth Income PortfolioCanadian Neutral Balanced32.22.3413.1
Meritage American Equity PortfolioU.S. Equity5.62.603-7.8
Meritage International Equity PortInternational Equity5.52.611-8.7
Figures as of Nov. 30. Source:

© 2007 The Globe and Mail. All rights reserved.

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