| Fund Company | Fidelity Investments Canada |
| Fund Type | Canadian Fixed Income Balanced |
| Rating | A |
| Style | Tactical Asset Allocation |
| Risk Level | Low – Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Geoff Stein since May 2011
Derek Young since May2011 |
| MER | 1.77% |
| Code | FID 294 – Front End Units
FID 594 – DSC Units |
| Minimum Investment | $500 |
Analysis:Today, this is a tactically focused fund that invests in a mix of fixed income asset classes and income oriented equities. Before July 2010 it was a dramatically different offering known as the Fidelity Monthly High Income Fund, which invested primarily in income trusts. The downside to this is it makes it difficult to get a sense of the longer term performance of the fund, since anything before 2010 is pretty much meaningless.
Today, the fund has a neutral asset mix of 70% fixed income and 30% equity. The managers have a fair degree of flexibility, and can take the equity weight as high as 50%. At the end of January, the fund was fairly neutral to its target weight, holding 30% in equities, 5% in cash, and the rest in a mix of fixed income investments
The fixed income portion will typically be quite diversified, with the managers having the flexibility to invest in any type of fixed income investment they feel best for the fund based on their view of the current investing climate. Currently, it is overweight corporates, and the managers, have added a small allocation to convertible bonds, for their “defensive equity” characteristics.
Within the equity sleeve, more than half is invested in the U.S., which has been one of the strongest performers in the past little while, and is expected to be in the near term.
Because the fund is largely made up of other Fidelity managed funds, it is very well diversified, holding more than a thousand bond positions and nearly 300 equity names.
The team at the helm is one of the strongest asset allocation teams around today and have done a great job since taking over the fund. For the three years ending February 28, it has returned an annualized 7.6% per year, handily outpacing both the benchmark and the peer group.
The biggest worry that I have with this fund is its interest rate sensitivity. With a minimum allocation of 50% to bonds, the absolute returns are likely to suffer when rates do begin to move higher. Still, I would expect that this fund will hold up better than others, given the quality of the underlying investment funds, and the management.