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Equities add spice to global bond funds

jnelson@globeandmail.com

What are we looking for?

How investors in global bond and debt-heavy balanced funds have fared in the past year.

The screen

We looked for the 15 best performers among global fixed-income and global fixed-income balanced funds for the year ended Dec. 31. U.S. dollar, segregated, pooled and duplicate versions of the funds were excluded. We also omitted funds with minimum investments of more than $25,000, and those sold to professional groups.

What did we find?

Global fixed-income balanced funds outperformed their more debt-focused peers, indicating that investments in stocks broadly benefited investors last year. (Global fixed-income balanced funds can invest up to 40 per cent of their total assets in equities.)

The Aston Hill Global Growth and Income fund posted a return of 27.2 per cent in the year. The fund is an outlier because it doesn't restrict its holdings by asset class or geographic focus. This means its equity holdings could move the fund out of the global fixed-income balanced category.

The Aston Hill fund was established in 2012 to provide investors with exposure to the U.S. recovery as consumers started to spend more money again. The industrial, health care and financial sectors were big focuses in the fund throughout the past year. "If you believe in a U.S. recovery, the companies that we own benefit from that environment," said Vivian Lo, a co-portfolio manager on the fund. "They have been refinancing their debt levels, so they're paying much better interest rates, and as the economy recovers their sales will improve."

Investment in shares of Foot Locker Inc. and Neiman Marcus bonds are two names that contributed positively to the fund's performance last year.

The debt securities that the Aston Hill fund holds are high yield only. It has no exposure to government or investment-grade corporate debt, which are more interest-rate sensitive.

In the coming year that fund will likely increase its presence in Europe and has already invested in Volkswagen. But Ms. Lo said she is mostly just looking around at the moment.

"Because it is a balanced fund we're happy to miss the first few innings of a recovery so that we're sure we're on sound footing." Investors should also be aware that the fund occasionally takes large cash positions - up to 40 per cent of the fund's assets in 2013.

"This is a very small and nimble fund," Ms. Lo said.

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GLOBAL FIXED-INCOME AND GLOBAL FIXED-INCOME BALANCED FUNDS

% return (Dec. 31)% returnAssets
Fund1-yr3-yr5-yr10-yr2012201120102009MER($-mil)Category
Aston H Gl Gr & Inc Srs A27.2%2.5543.0Glbl Fxd Incm Bal
Chou Bond Series A23.8%4.5%16.6%12.9%-18.4%32.7%42.5%1.5736.4Glbl Fxd Incm Bal
CI Cambridge Income14.9%2.33161.5Glbl Fxd Incm Bal
Manulife Yield Opportunities Fund11.8%6.9%10.1%-0.7%9.9%2.33887.9Glbl Fxd Incm Bal
Vertex Enhanced Income-B11.3%5.5%12.4%-6.3%15.8%2.53106.7Glbl Fxd Incm Bal
Fidelity Global Income Portfolio-B8.7%5.9%8.9%7.5%1.6%8.0%19.4%2.0861.5Glbl Fxd Incm Bal
DynamicEdge Conservative Class Port8.6%2.0949.6Glbl Fxd Incm Bal
CI Select 80i20e Managed Pt Corp Cl8.5%5.6%7.0%7.7%0.6%6.8%11.7%2.14147.1Glbl Fxd Incm Bal
Portfolio Series Income A8.5%6.3%8.4%5.1%6.5%3.9%8.8%14.6%2.011,131.8Glbl Fxd Incm Bal
RBC Select Choices Conservative8.2%4.6%6.8%3.9%5.2%0.7%7.0%13.2%1.95185.1Glbl Fxd Incm Bal
Manulife Diversified Income Port8.0%4.4%8.4%7.0%-1.6%11.0%18.7%2.3069.9Glbl Fxd Incm Bal
BMO SelectTrust Conservative Port-C7.9%5.7%8.1%5.3%4.0%7.7%15.8%2.44186.9Glbl Fxd Incm Bal
Lysander Corporate Value Bond Cl A7.7%8.8%1.59118.9Global Fixed Incm
Sun Life Mgd Cons Portfolio7.6%1.8641.1Glbl Fxd Incm Bal
Fidelity Income Portfolio-B7.5%5.4%8.3%6.4%2.2%8.1%17.9%2.09192.9Glbl Fxd Incm Bal
S&P/TSX Total Return13.0%3.4%11.9%8.0%7.2%-8.7%17.6%35.1%
S&P 500 Composite Total Return Idx($Cdn)38.3%17.9%14.1%5.1%13.5%4.4%9.3%8.1%
MSCI World ($ Cdn)36.2%14.7%12.5%5.5%14.0%-2.9%6.8%11.8%
Source: Lipper. Data compiled by: Wei Sun

© 2007 The Globe and Mail. All rights reserved.

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