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Analysis: This is a Canadian Neutral Balanced Fund that is managed by the RBC Investment Policy Committee. There is a lot of talent on the committee including such respected managers as Stu Kedwell, Doug Raymond and Suzanne Gaynor. Unfortunately, the performance of the fund has not lived up to the talent involved in managing it. Although in fairness, that may have as much to do with the size of the fund and the fund as it does the team involved. At $7.4 Billion in assets, the fund holds 375 stocks and 175 bonds.
The asset mix is managed using a strategic approach, and the neutral asset mix of the fund is 45% Canadian Bonds, 35% Canadian equities, 10% U.S. equities and 10% International equities. The team will make subtle tactical shifts in the asset mix based on the views of the RBC Investment Policy Committee.
In selecting stocks for the portfolio, the managers tend to use a bottom up, GARP approach, looking predominantly at large cap, growing companies with favourable cash flow and growth prospects. In the fixed income sleeve, the focus is on quality where the managers will focus only on investment grade bonds.
The Fund is very well diversified, with the top 10 names making up just over 22% of the fund. The managers feel that while the longer term outlook for equities remains positive, the short term volatility is making for a challenging environment. They have positioned the fund to be modestly overweight in equities and underweight in fixed income, with the fund being 35% bonds, 36% Canadian equity, 14% U.S. equity and 10% International equity. Cash is modest at just over 5%.
Recent performance has been middling at best, posting 2nd or 3rd quartile performance. Given the outlook, we don’t really expect this to change, at least not in the near to medium term. The Fund is priced right around the category median, with an MER of 2.35% – not exactly a bargain.
While this is not a bad fund, it isn’t a good fund either. In my opinion, there are much better balanced fund options available to investors.