Fidelity Monthly Income Fund

Analysis: I have been a fan of this fund since just after Geoff Stein took responsibility for setting the asset mix. The recent addition of David Wolf, a former advisor to the Bank of Canada certainly won’t hurt this fund going forward either. While at the Bank, Mr. Wolf was the main editor of the quarterly Monetary Policy Report and worked with the governing council that sets the Bank’s overnight rate. Not a bad little resume, and will no doubt be able to bring some valuable insight to the asset allocation committee and Fidelity’s roster of managers.

The fund is managed much like a fund of funds, investing in a mix of Fidelity managed pools run by some of the firm’s top managers, including one of my favourites, Daniel Dupont.

In addition to the main asset classes, Mr. Stein also has access to a number of other mandates, such as high yield, convertible debt, and floating rate notes, thanks to Fidelity’s massive global reach.

At the end of November, it had more than 40% invested in bonds. It is very well diversified, with exposure to a diversified basket of fixed income including both Canadian and U.S. investment grade debt, U.S. high yield, emerging market debt, and a small allocation to floating rate notes. Currency exposure is typically hedged to Canadian dollars.

The equity portfolio is a mix of value focused names and higher yielding equities. They are currently overweight consumer staples names like Empire and Safeway. It is underweight materials and energy.

They remain positive on the U.S. and have an underweight position in Canadian equities. They believe the Canadian economy is going to face headwinds with lower demand for commodities.

The biggest worry with this fund is its higher level of interest rate sensitivity, which may act as a headwind when rates start to rise. Still, with its emphasis on risk management and strong oversight, this remains a great fund for most investors.