Despite gaining 1.2% in the quarter, the fund underperformed its peers. There were a couple of reasons for this underperformance.
The fund has about half of its bond exposure invested in high yield issues, which were hit hard in the final quarter of the year. It also has an overweight position in REITs, which have struggled and had a tough Q4. Finally, financials, particularly U.S. financials faced some headwinds on economic worries. The result was a lackluster quarter where most of the gains were the result of the unhedged currency position.
Still, this has been one of the stronger balanced funds around over the long term It has an excellent management team at the helm, using a disciplined, holistic approach that has generates superior risk adjusted returns over the long term. Given the positioning, I would expect to see some more volatility in the near term, but longer term, it should return to its former glory, delivering above average returns with below average volatility.