| Fund Company | Fidelity Investments Canada |
| Fund Type | Canadian Neutral Balanced |
| Rating | $$$ |
| Style | Bottom up blend |
| Risk Level | Low – Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Mariana Egan since March 2009 Geoffrey Stein |
| MER | 2.07% |
| Code | FID 282 – Front End Units FID 582 – DSC Units |
| Minimum Investment | $500 |
Analysis: If you like your balanced funds to be exciting and flashy, then you are definitely not going to like the Fidelity Canadian Balanced Fund. But, if you are looking for stability and consistency, you may want to keep reading.
The fund, headed up by Mariana Egan and Geoffrey Stein, is run much like a fund of funds. The two lead managers are responsible for the asset mix, while teams of specialists take care of the security selection for the underlying asset classes. The target asset mix for the fund is set at 50% equities, 40% investment grade bonds and 10% high yield bonds.
As of July 31, it held 40% Canadian equity, 6% global equities, 37% Canadian bonds, 11% in high yield and 6% in cash. The equity focus of the fund is on high quality, well managed companies that are trading below their intrinsic value. While they are primarily invested in Canadian equities, they may opportunistically add some U.S. and global exposure when appropriate. Stocks are selected using a mix of top down and bottom up analysis. Large caps make up the majority of the equity component, with the top holdings being represented by familiar names like TD Bank, Royal Bank and Suncor Energy.
Within the fixed income portion of the fund, the managers use a duration neutral approach that looks to add value while controlling overall volatility. They look for yield enhancing strategies designed around security selection and sector allocation. Individual bonds are selected using a quantitative and fundamental bottom up process. Corporate bonds make up about 40% of the bond sleeve, while governments represent nearly 50%. This government weighting is up to protect the fund against potential economic “tail risks” such as the European debt crisis.
The fund may be at a bit of a disadvantage to a more actively managed balanced fund because of its static asset mix. This limits the managers’ ability to protect against rising rates. But for the time being, with rates expected to remain on hold, we expect that this fund will continue to do what it has done for the past ten years – deliver relatively stable returns for investors. However, as the threat of a rate hike begins to loom larger, some caution may be warranted.