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Mutual Fund News

Conservative or aggressive? Four analysts pick

Experts identify solid-performance funds that aim to deliver above-average returns in the coming year

SPECIAL TO THE GLOBE AND MAIL

Investing in mutual funds can be an easy way to build a retirement nest egg. They are handy for novice investors with smaller sums of money, or those who want instant diversification among stocks and bonds.

But you also need to be mindful of the fees (management-expense ratio) charged by some funds because they can be high, and eat away at returns over time. Low-fee index funds may seem more attractive, but they can't hold cash like their actively managed peers.

For nervous Nellies, cash can help cushion the bumpy ride in sharply falling markets.

As the deadline nears for the registered retirement savings plan [RRSP] season, remember that some markets like the United States have been on a tear over the past year. The easy money has been made so don't expect the same robust gains. History shows that the laggard funds of last year could be the future winners. To help investors sift through the fund maze, we asked four analysts for their top conservative and aggressive picks.

Dan Hallett, director of asset management, HighView Financial Group

Mawer Balanced (conservative). This lower-fee fund, which invests in six Mawer stock and bond funds, offers "an exposure to a bit of everything in a simple and efficient structure," Mr. Hallett said. "This is a terrific one-decision fund that investors can use as their sole holding for investments well above $100,000, and starting as low as $5,000 (if bought through a discount broker). Don't expect a repeat of its 2013 return of 20 per cent, but do expect solid performance that beats most others over time."

Mackenzie Cundill Recovery (aggressive). This global small- to mid-cap equity fund run by value investor James Morton last year suffered relative to some markets around the world, but its 5-per-cent gain "is hardly going to cause panic," Mr. Hallett said. "A heavy dose of emerging markets and the real estate, both of which had meagre returns, explain a good portion of the fund's underperformance." It can take longer for the value in the fund's holdings to surface.

Dave Paterson, fund analyst, D. A. Paterson & Associates Inc.

Mawer Balanced (conservative). This global fund-of-funds "may not shoot the lights out, but I expect that it will deliver above-average returns," Mr. Paterson said. The fund has about 60 per cent in Canadian and foreign equities, and 30 per cent in bonds through other Mawer funds. The returns of Mawer Balanced have consistently been above its peer-group average thanks in part to its lower than 1-per-cent fee, he added.

Black Creek Global Leaders (aggressive). The global stock fund managed by Bill Kanko since 2006 has a "go-anywhere" mandate, but it is about 40 per cent invested in U.S. securities, Mr. Paterson said. The fund, which typically holds about 20 to 25 companies, owns an eclectic mix of names such as Oracle Corp., Carnival Corp. and BioMerieux Inc.

"I believe that it is well positioned to deliver above-average returns in the coming year," although a potential drawback over time is its higher 2.59-per-cent annual fee, he said.

James Gauthier, head of investment research at HollisWealth Inc.

Trimark Global Small Companies (aggressive). Manager Robert Mikalachki believes that "investing in small caps is like playing poker, and starting with two aces right off the bat," Mr. Gauthier said. Smaller companies can operate in niches that can grow faster than the broader industry, and are often under-covered by analysts.

His fund has posted a 24-per-cent, annualized return over five years, and now has about 25 per cent in cash. "Mikalachki has no problem holding lots of cash when he doesn't see opportunities," he said.

Manulife Monthly High Income (conservative). This Canadian balanced fund overseen by Alan Wicks aims to pay stable distributions, while preserving capital, Mr. Gauthier said.

The portfolio owns investment grade bonds, real estate investment trusts (REITs), high dividend-paying stocks and former income trusts.

"A noteworthy change over the past couple of years has been a ramp-up in U.S. equity exposure," he said. Some of the holdings at the end of 2013 included IBM, Procter & Gamble, and Loblaw Cos. Ltd.

Salman Ahmed, associate director of active funds research, Morningstar Canada

Beutel Goodman Balanced (conservative). The Canadian equity balanced fund co-run by Mark Thomson and Bruce Corneil is more of a "core" holding, Mr. Ahmed said. "The fund does more to protect on the downside than outperform in an up market."

The team looks for companies with above-average free cash flows, and that trade at a significant discount to intrinsic value. A minimum $5,000-investment required.

The fund has a 1.21-per-cent fee if bought through a discount broker, and 2.01 per cent through an adviser.

Chou Associates (aggressive). The global equity fund run by value investor Francis Chou holds a concentrated portfolio of companies, and has low turnover. Investors in the fund need to be patient and focused on the long term because the manager's approach can lead to the underperformance during certain periods, Mr. Ahmed said. The minimum initial investment is $5,000. Recent top holdings have included names such as Berkshire Hathaway Inc., Citigroup Inc. and Resolute Forest Products Inc.

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MUTUAL FUNDS FOR AN RRSP

Assets% rtn (Dec. 31)
FUND NAMEMER($-mil)1-yr3-yr5-yr10-yr
Chou Associates1.88456.141.3314.2418.187.98
Black Creek Global Leaders A2.59632.041.0512.9914.81
Trimark Global Small Co Class A2.66143.937.8019.8923.84
Mawer Balanced Class A0.95657.020.2011.2911.997.77
Manulife Monthly High Income Fund2.137,798.515.878.0910.917.00
Beutel Goodman Balanced-D1.213,281.715.578.039.316.44
Mackenzie Cun Recovery Sr C2.61,006.05.11-3.6812.775.86

© 2007 The Globe and Mail. All rights reserved.

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