| Fund Company | Franklin Templeton Investments |
| Fund Type | Canadian Equity Balanced |
| Rating | A |
| Style | Growth at a Reasonable Price |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Ryan Crowther since June 2011
Les Stelmach since December 2012 |
| MER | 2.39% |
| Code | TML 203 – Front End Units
TML 303 – DSC Units |
| Minimum Investment | $500 |
Analysis: Managed using Bissett’s fundamentally driven, bottom up security selection approach, this provides exposure to a mix of high yielding equities, and up to 25% invested in fixed income investments. The equity sleeve invests predominantly in Canada, but will find opportunities in the U.S. that aren’t available at home.
Their approach looks to find companies that have strong, consistent earnings, growing cash flow and a history of financial strength. While the emphasis is on income, it invests primarily in dividend paying companies. The investment process is very patient, as portfolio turnover has averaged less than 15% over each of the past five years.
At the end of June, it held approximately 15% in bonds, with the balance in equities. The fixed income holdings are somewhat defensively positioned with a duration that is well below the benchmark. Credit quality is very high.
The equity portion looks a lot like you would expect a dividend fund to look, with significant allocations to both energy and financials. Combined, these two sectors make up more than half the fund. It pays a monthly distribution of $0.055 per unit, which works out to an annualized yield of approximately 2.1%.
Performance since 2010 has been very strong, outpacing most of its peer group. So far this year, it has lagged, largely because of underperformance from some of its key financial names, and zero exposure to Encana, Suncor and Canadian Natural Resources. For the three years ending August 31, it has generated an annualized return of 12.07% per year. As with many of the funds I like, the volatility has been well below both the index and its peer group. Capital protection is also quite strong, with a down capture ratio across all time periods.
Looking forward, I expect that the fund will continue to deliver. Many of the holdings continue to show nice gains, based on the growing profitability of their underlying businesses. Further, the manager believes that in most cases, these companies are trading below what would be defined as their intrinsic value, providing strong upside potential.