Dynamic Strategic Yield Fund

Analysis: This is a relatively new balanced fund that is managed by the team of Oscar Belaiche and Michael McHugh. It invests in a mix of stocks and bonds with the objective of generating a total return that is a mix of yield and long term capital growth. It pays investors a monthly distribution of $0.0584 a unit, which works out to an annualized yield of about 4.8%.

This truly has a “go anywhere” mandate and can invest in companies of any size, operating in any industry sector, that are located anywhere in the world. Like other funds managed by Mr. Belaiche, it looks for companies which fit into their “quality at a reasonable price” criteria. These types of companies typically generate strong levels of cash flow, have sound balance sheets and sustainable and growing dividends.

Michael McHugh is responsible for the bond sleeve of the fund. True to his style, it is conservatively managed and focused on corporate bonds, both Canadian and global.

The overall asset mix is based on their expectations for the economic and market conditions. They will position the fund in a way that will allow them to focus on the most attractive investment opportunities. At the end of November, it held 13% cash, 25% bonds, and 55% in equities.

One big drawback to this fund is that its underlying portfolio is fairly interest rate sensitive. While the longer term returns have been quite strong, it has struggled recently. With the current rate environment, I expect that it will continue to struggle in the near term. Still, the managers have done a great job at keeping volatility well contained.

Over the long term, I expect that this fund should do well. Shorter term however, I believe that returns will be closer to that of its peers, but with below average volatility.