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Mutual Fund News

A lingering love affair with balanced funds

swon@globeandmail.com

What are we looking for?

Given that today is Valentine's Day, let's look at the funds that investors have fallen in love with the most over the years. Let's see how these giant funds have fared over the short and longer term.

The screen

We searched for the 15 biggest mutual funds for the year ended Jan. 31. U.S. dollar, money market and duplicate versions of funds were excluded.

What did we find?

Love affairs with lots of balanced funds, and a ton of bank-run funds.

It appears that investors remain jittery after the 2008 stock market meltdown, and are hedging their bets with balanced funds holding both stocks and bonds. Over 10 years, it hasn't been a bad idea because some of them have actually done better than the Canadian market. For instance, TD Monthly Income, which posted a 9-per-cent annualized return, has outpaced the S&P/TSX Total Return Index's 6.2-per-gain over the same period.

Among the banks, the mutual fund arm of Royal Bank of Canada has been successful at attracting investors. Seven out of the biggest 15 funds belong to its fund family. That's not too surprising given that it is the biggest fund player in Canada with about $110-billion in assets.

Giant bank funds are also providing some strong competition to ones sold by independent firms.

Among Canadian equity balanced funds, we return to TD Monthly Income, which is managed by Doug Warwick: Over five years the fund has posted an annualized 4.4-per-cent return, faring better than both Investors Dividend and CI Harbour Growth & Income. In this category, funds must have more than 60 per cent of assets in equities. Over 10 years, the TD fund's 9-per-cent gain has outperformed CI Harbour Growth & Income's 6.8-per-cent return. Undoubtedly, the TD fund's low 1.4-per-cent fee has helped.

Among Canadian stock funds, the RBC Canadian Equity fund, which is solely focused on Canadian stocks, climbed 24.4-per-cent return over one year.

It outpaced the 16.7-per-cent return by CI Harbour, which can invest up to 50 per cent in foreign stocks. Over 10 years, however, manager Gerry Coleman, who runs CI Harbour, still has a more impressive annualized 8.1-per-cent return.

While funds sold by independent fund companies may have a higher profile than many of their bank peers, it looks like similar-sized bank-run funds are no slouches.

***

HOW THE GIANT MUTUAL FUNDS ARE FARING

% Return as of January 31, 2011
Fund name1-year3-year5-year10-yearMERAssets ($-mil)Category
Investors Dividend-A11.492.582.05-2.6812,230.2Canadian Equity Balanced
RBC Canadian Dividend18.133.213.908.121.709,726.0Canadian Dividend and Income Equity
TD Canadian Bond3.825.854.635.821.058,887.8Canadian Fixed Income
CI Harbour Growth & Income14.012.583.236.792.398,433.2Canadian Equity Balanced
RBC Balanced12.141.072.013.612.257,897.3Canadian Neutral Balanced
RBC Monthly Income11.284.624.427.821.146,883.4Canadian Neutral Balanced
CIBC Monthly Income14.032.853.427.771.426,049.2Canadian Neutral Balanced
CI Harbour16.743.114.098.112.405,644.8Canadian Focused Equity
RBC Select Balanced9.601.021.813.191.855,342.9Global Neutral Balanced
RBC Select Conservative7.232.202.633.831.754,841.1Global Fixed Income Balanced
BMO Monthly Income12.314.253.886.021.514,796.4Canadian Neutral Balanced
RBC Bond4.045.424.384.701.164,754.1Canadian Fixed Income
Mackenzie Cundill Value 'C'16.92-0.270.494.572.434,740.3Global Equity
RBC Cdn Equity24.372.494.066.471.964,445.7Canadian Equity
TD Monthly Income13.234.344.449.011.404,107.0Canadian Equity Balanced
S&P/TSX Total Return25.484.095.476.21
MSCI World ($ Cdn)12.77-0.99-0.12-1.21
S&P 500 Composite ($ Cdn)12.70-2.29-2.52-4.53
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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