I have had some concerns about this fund for the past few quarters, given its spotty performance.
I believe it has struggled against other balanced funds for a few reasons – first, it has been one of the more aggressively positioned balanced funds and has been underweight fixed income. That has hurt relative performance as Canadian yields dropped in Q1. Second, its equity exposure is concentrated in energy and financials, which have struggled of late. Third, they have about 75% of their USD exposure hedged, which has dragged the CAD performance of their foreign holdings while the dollar fell against the USD.
The bond sleeve is focused on investment grade bonds. Duration is slightly less than the FTSE/TMX Bond Universe, but the yield is significantly higher at 4.7%. As such, it should hold up better than the broader market, but will still be hit if we see upward pressure on yields.
The managers have recently pulled the equity weight back a bit, but it’s still sitting at around 62%, with a third in bonds and the rest in cash. A little less than half the equity exposure is in foreign names. They have also repositioned their energy names into higher quality companies that are expected to withstand the lower oil price.
Still, considering the above, I believe there are more attractive balanced funds available.