| Fund Company | HSBC Global Asset Management |
| Fund Type | Canadian Fixed Income Balanced |
| Rating | F |
| Style | Growth |
| Risk Level | Medium |
| Load Status | No Load |
| Manager | HSBC Management Team |
| MER | 1.47% |
| Code | HKB 518 – No Load Units |
| Minimum Investment | $500 |
Analysis: As the name suggest, this fund looks to deliver a consistent monthly income, while preserving capital over the long term. It pays a monthly distribution of $0.02 per unit, which works out to an annualized yield of 2.5%, which is pretty low by income fund standards.
The neutral asset mix is 10% in preferred equities, 30% in Canadian equity, and 60% in short and medium term bonds. As of September 30, the fund was pretty much in line with the target mix. They manger believes that equity valuations are reasonably attractive based on history, and feels the earnings environment will continue to be supportive. The focus will remain on high dividend paying equities.
The bond portion of the fund is overweight in corporate bonds and mortgages. They believe that valuations are more attractive in the corporate bond space. Given the outlook for interest rates, they will not be taking on any more interest rate risk in the fund at the moment.
Performance, particularly of later has been strong, outpacing the majority of its peer group. But, it has experienced higher than average volatility. For example, in 2008 the benchmark lost 4.8% while the fund lost 9.7%. But it did manage to outpace it on the rebound, gaining nearly 15%, outpacing the benchmark by nearly 300 basis points.
Looking at the risk reward characteristics of the fund, I believe that there are better options available in the category. Even with the recent uptick in performance, I don’t believe that investors are adequately rewarded for the risk that they take on with this fund and could do better elsewhere.