Mawer Balanced Fund

Analysis: This has been one of the strongest balanced funds around for many year, consistently outperforming its peer group on both an absolute and risk adjusted basis.

It is very simple fund, investing in other Mawer managed mutual funds. It is a very well diversified portfolio, with 11% in cash, 30% in fixed income, 18% in Canadian equity, 22% in U.S. equities and the balance in international equities. Mr. Peterson manages the asset mix, and tends to make any changes in a very measured and gradual fashion.

Each of the underlying funds are managed using Mawer’s disciplined, research driven, bottom up process that looks to find well managed, wealth creating companies that are trading at less than they are worth. This approach is very team focused, with portfolio managers and analysts constantly challenging ideas. Another interesting aspect is the stress testing of valuations the team conducts helping to provide an extra layer of insight to the companies they own.

The quality of the underlying funds is top notch, with two exceptions. The first is the Mawer U.S. Equity Fund. It continues to struggle to differentiate itself from its peers. It tends to lag the market when it’s going up, and underperforms when it is falling. It has failed to add any value to the S&P 500, and has been more volatile. I expect it to be in the middle of the pack, and don’t see anything that leads me to believe this is a consistent top performer.

Second would be the Mawer Canadian Bond Fund, which looks quite like its index by most measures. It holds only 40% in corporate bonds, with the balance in governments. This positioning results in a high level of interest rate sensitivity, which is highly likely to cause underperformance when rates start moving higher.

Still, this remains one of the best choices for investors looking for a one ticket solution. It offers a very disciplined management process, and a rock bottom MER of 0.96%. Even adding in 1% for dealer compensation this fund is still cheap.