| Fund Company | Invesco Canada Ltd. |
| Fund Type | Canadian Equity Balanced |
| Rating | C |
| Style | Blend |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Clayton Zacharias since April 2012 Rory Ronan since August 2007 |
| MER | 1.82% – Series SC 2.58% – Series A |
| Code | AIM 1543 – Front End Units AIM 1541 – DSC Units |
| Minimum Investment | $500 |
Analysis: In the past several months, this Canadian focused balanced fund has experienced some meaningful manager turnover. A year ago, it was announced that equity manager Don Simpson had been replaced by Clayton Zacharias. More recently, longtime bond manager Rex Chong left the firm for personal reasons. Looking at the net impact of these moves, we view it to be a modest positive.
The equity portion of the fund will continue to be managed in the Trimark philosophy, which is business people buying businesses. Mr. Zacharias has a very respectable track record during his tenure with the Trimark Canadian Endeavour Fund. With that fund, he has been able to post top quartile performance. One key difference between that fund and this one is that the Endeavour fund is more mid cap focused, while this fund will lean more towards the large caps. Still, the investment process and philosophy will be identical.
While it was sad to hear of Mr. Chong’s departure, we don’t expect that it will have a significant impact on the management of the bond sleeve of this fund. It will continue to provide a volatility buffer for the equity holdings and generate some level of income. It is currently overweight in corporates given their level of valuation relative to governments.
The fund is positioned for growth with an overweight position in equities. It holds 42% in Canadian equity, 22% in U.S. equity, 23% in fixed income and the balance in cash.
The level of portfolio turnover has been modest, averaging around 50% a year. It was noticeably higher in 2012, but that is not unexpected given the manager change. We would expect that it will return back down towards the longer term numbers going forward.
Performance has been decent, but unspectacular. For the five years ending May 31, it gained 2.7%, outpacing its benchmark which gained 1.7% during the same period. Shorter term numbers are stronger, with a one year gain of 16.7%, compared to a 10.4% rise in the benchmark. Volatility has been above average, but given the higher equity component, this is not unexpected.
Looking forward, we are cautiously optimistic that with Mr. Zacharias managing the equity portion that we will see a sustained improvement in overall returns. Still, it is our opinion that there are better balanced fund options available to investors.