| Fund Company | Fidelity Investments Canada |
| Fund Type | Canadian Neutral Balanced |
| Rating | A |
| Style | Value |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Geoff Stein since April 2011 Derek Young since September 2011 |
| MER | 2.09% |
| Code | FID 269 – Front End Units FID 569 – DSC Units |
| Minimum Investment | $500 |
Analysis: This high quality balanced fund has not missed a beat since managers Geoff Stein and Derek Young took the reins in 2011. The team runs the fund much like a fund of funds, where it invests in a number of underlying funds run by various asset class teams at Fidelity based on their outlook.
It invests mainly in a mix of Canadian high yielding equity and fixed income securities, but will also have some exposure to global equities and high yield and emerging market debt. The fund’s neutral asset mix is 50% Canadian equities, 30% Canadian bonds, and 20% global bonds. As of May 31, it was 23% Canadian equity, 21% in foreign equities, 5% in convertible bonds, 27% Canadian bonds, 18% in global bonds, and 6% in cash.
Looking at the portfolio’s makeup, the managers are defensively positioned. The fixed income exposure is slightly overweight in corporate bonds, and 11% is invested in high yield. In the equity sleeve, they are significantly overweight in consumer defensives and technology. They are underweight financials because they are concerned about the high levels of debt that Canadians are carrying. They are underweight commodity focused sectors because they believe that a slowing economy both at home, and in China will continue to keep pressure on commodity prices. In general, they like companies that have stable, defensive and less economically sensitive businesses. This will help keep volatility in check.
Performance has been very strong, with a five year return of 6.53%, handily outpacing its benchmark. It has finished in the top quartile every year since its launch except for 2008 when it was in the third, and 2004 when it was in the second. Even with the manager change, performance has been strong, posting an impressive 9.2% one year gain to June 30, leaving the benchmark in the dust.
As the name suggests, it pays a regular distribution. It is a variable amount, and in the past year has ranged between $0.0097 and $0.0244. At current prices, it is yielding approximately 1.4%. As a result, this won’t be a significant cash flow generator for most investors. It is also available in a T-Series that will pay annualized 5% and 8% distributions if you are looking for that cash flow.
With its balanced asset mix, I wouldn’t be counting on this fund to deliver double digit returns into the future. But if you are looking for a high quality balanced fund that should continue to outpace its rivals, this is a fund to consider.