| Fund Company | Sentry Investments |
|---|---|
| Fund Type | Canadian Neutral Balanced |
| Rating | A |
| Style | Large Cap Blend |
| Risk Level | Low - Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| Manager | Michael Simpson since January 2012 |
| James Dutkiewicz since May 2012 | |
| MER | 2.23% |
| Fund Code | NCE 734 - Front End Units |
| NCE 334 - DSC Units | |
| Minimum Investment | $500 |
Analysis: This conservatively managed balanced fund has been run by the team of Michael Simpson and James Dutkiewicz since 2012, and performance, particularly on a risk adjusted basis has been strong. For the three years ending January 31, it gained 10%, outpacing its peer group. However, factor in the fund’s volatility, which has been well below average, you get a Sharpe Ratio that is nearly double the category average.
The asset mix is pretty close to balanced, with 49% equity, 44% bonds, and 7% in cash.
It is heavily weighted towards corporate bonds, which make up more than half of the fixed income sleeve. While the focus is on investment grade, about one quarter is invested in high yield bonds. On a whole, the bond sleeve offers investors a higher yield than the FTSE/TMX Universe Bond Index with a lower duration. This positioning may help explain some of the fund’s recent underperformance, where longer dated bond issues have rallied higher after the Bank of Canada’s surprise rate cut in January.
The equity portion is managed in a similar way to the highly regarded Sentry Canadian Income Fund, although this fund’s smaller size allows it to take more of an all cap approach. It is also able to invest outside of Canada, and currently has about 20% foreign exposure, with the bulk of that coming in the form of U.S. equities.
It is also a decent option for those looking for cash flow. It pays a monthly distribution of $0.0375 per unit, which works out to an annualized yield of 3.5% at current prices. The MER is 2.23%, which is above the average Canadian Neutral Balanced Fund.
There are two things about this fund which cause me some shorter term concern. The first is the fixed income portfolio, which is better suited to a flat or rising yield environment, which is in doubt, particularly in Canada. The other concern is its overweight energy exposure. While a lot of the selloff was overdone, it may result in higher volatility levels going forward.
Still, I feel this is one of the stronger balanced offerings available, and a good option for risk averse investors.