Exchange-traded funds get most of the attention these days, but mutual funds remain the predominant vehicle in Canadian wealth management. As of the end of 2013, ETF investments accounted for just 6 per cent of the $1-trillion under management in ETFs and mutual funds, according to Investor Economics.
Critics lament their relatively high fees, but mutual funds are still very much in demand as an easy vehicle for younger and middle-class Canadians to save. We asked investing professionals for their top conservative mutual fund picks.
Senior wealth adviser,
The Newman Group, a ScotiaMcLeod affiliate
1. Dynamic Strategic Yield Fund
This fund has managed to deliver both high levels of income and capital growth, exceeding the return on the S&P/TSX composite index since starting up in 2009, while experiencing less volatility, Mr. Newman said. The fund has experienced only nine days on which it lost more than 1 per cent. "While the mandate is yield, the managers have the flexibility to avoid asset classes they believe may be at risk."
2. Sentry Conservative
Balanced Income Fund
Also positioned to generate both income and capital gains, this fund is diversified across conservative, large-cap fixed-income and income-oriented stocks. "The portfolio managers focus on high quality companies with solid management teams, strong balance sheets, low debt and firms that can generate free cash flow," Mr. Newman said.
3. RBC QUBE Low Volatility
Canadian Equity Fund
This fund tries to maintain returns while minimizing volatility by focusing on profitable companies with low debt and stable returns, These stocks tend to do better during short-term sell-offs, as well as over the longer term, Mr. Newman said. "This strategy has gained momentum amongst institutional investors and may eventually resonate with retail investors."
Fund analyst, D. A. Paterson &
1. Sentry Conservative Balanced Income Fund
This fund has delivered superior risk-adjusted returns through fairly active management of the asset mix.
"The fixed-income sleeve is more conservatively positioned than the DEX Bond Universe, with a higher yield and a lower duration," Mr. Paterson said.
2. Steadyhand Income Fund
Corporate bonds currently account for this fund's greatest weighting, with the balance in high-yielding equities and REITs. "While I don't expect it to deliver the same level of gains that it has of late, I do think it will handily outpace traditional bond funds," Mr. Paterson said.
3. CI Signature High Income Fund
"This has been one of my favourite funds for years," Mr. Paterson said. It invests in fairly high-yielding stocks as well as corporate and high-yield bonds. That asset mix, which includes exposure to medium-cap stocks, may make this fund riskier than its low historic volatility might suggest.
Manager of financial planning,
1. Mawer International Equity Fund
Formerly known as Mawer World Investment, this fund has outperformed the index consistently over the long term, Mr Ardrey said. And its MER of 1.49 per cent is low for an actively managed fund in the international equity space.
"Its long track record, consistent management team and commitment to keeping fees low make it a worthwhile addition."
2. TD Canadian Index Fund E
This fund has generally performed comparably to the S&P/TSX composite index, and with one of the lowest MERs in its category at 0.33 per cent.
"Its one limitation is that it must be bought through a TD account, but it is worth it for its low fees and track record," Mr. Ardrey said.
3. PH&N U.S. Dividend
Income Fund D
Almost 40 years since its inception, this fund has a long history of solid returns with relatively low fees, Mr. Ardrey said.
"The drawback to this fund is a larger initial investment of $25,000, which may keep it out of reach of small investors."
MUTUAL FUNDS FOR CONSERVATIVE INVESTING
|Fund||6-mo. avg % rtn (Jan. 31)||1-yr % rtn||3-yr % rtn||5-yr % rtn||10-yr % rtn||MER||Total Assets ($-mil)||Category|
|Dynamic Strategic Yield Fund||7.54||9.55||7.53||2.28||5,644.8||Global Neutral Balanced|
|Sentry Conservative Balanced Income Fund||7.01||11.07||8.71||2.25||1,201.6||Cdn Neutral Balanced|
|RBC QUBE Low Volatility Canadian Equity Fund||6.96||9.44||2.05||708.6||Canadian Equity|
|Steadyhand Income Fund||4.77||4.60||7.56||11.16||1.00||71.4||Cdn Fixed Incm Balanced|
|CI Signature High Income||6.46||7.72||7.86||13.89||8.32||1.60||5,227.2||Global Neutral Balanced|
|Mawer International Equity Fund||12.98||18.09||9.92||15.03||6.92||1.49||2,321.0||International Equity|
|TD Canadian Index Fund E||11.22||11.05||3.05||12.44||7.34||0.33||Canadian Equity|
|PH&N U.S. Dividend Income Fund D||8.91||11.99||7.03||14.28||5.89||1.18||1,748.5||Cdn Div & Incm Equity|
|Source: Globe Investor, Morningstar Canada|
© 2007 The Globe and Mail. All rights reserved.
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.