| Fund Company | Invesco Canada Ltd. |
| Fund Type | Canadian Equity Balanced |
| Rating | B |
| Style | Blend |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Rory Ronan since December 2004 Anthony Imbesi since December 2004 |
| MER | 2.18% |
| Code | AIM 313 – Front End Units AIM 311 – DSC Units |
| Minimum Investment | $500 |
Analysis: This fund invests in a mix of Canadian and foreign stock, REITs, and income trusts, as well as Canadian and global fixed income, including high yield, investment grade, preferred shares and convertible debt. Despite the focus on generating yield, the managers select securities using a total return approach, which looks for an attractive long term return though a mix of investment income, dividends and capital gains.
The management team is looking for companies that have sustainable competitive advantages and can grow their revenues, earnings, cash flows and dividends throughout the economic cycle. In addition, the companies must be trading at a discount to what the managers believe it is truly worth. To determine the intrinsic value, extensive fundamental analysis is undertaken. Investment candidates must have management teams in place that have a demonstrated history of being able to grow earnings and cash flows.
The portfolio is very well diversified holding more than 100 names, with the top ten making up just over a quarter of the fund.
In reviewing the current asset mix, it is aggressively positioned, with more than 70% invested in equities. Within the equity portion, financials, consumer discretionary and energy are the main sectors. This is not surprising given the fund’s emphasis on yield.
The balance of the portfolio is made up of 20% fixed income and 10% cash. They remain quite cautious on the bond market and favour corporate bonds over governments, given their relative attractiveness from a risk reward standpoint. Still, the managers do not believe that corporate bonds will be able to repeat their recent performance going forward. They expect to move into fixed income when they begin to see an improvement in the risk reward profile.
Performance has been very strong with an annualized five year return of 6.1%, compared to a gain of 3.9% in the benchmark over the same period. Volatility is on the high side, but given the high equity exposure, this is not unexpected. It is our expectation that the equity weighting will remain near the upper end of the range, and expect that volatility will remain in the upper half of the category.
Costs are reasonable, with an MER of 2.20%, which is below the category average. The fund is available in a wide range of income options, including series that will pay 4%, 6% and 8, as well as an A Class which only pays out capital gains earned one a year.
For investors looking for a fund that offers some growth potential and the opportunity to generate some decent cash flow, it is our opinion that this is one of the better choices available for investors.