Volume18, Number 2
February 2012
Single Issue $15
- What’s New
- The Best Portfolio Funds
- Recommended List Review
- Recommended List
- 2011 Model Portfolio Review
WHAT’S NEW
iShares snaps up rival Claymore – On January 11, it was announced that BlackRock, Inc., the company behind the industry leading iShares brand had entered into an agreement to buy Claymore Investments. Once completed, the combined firm will offer more than 80 ETFs and have more than $35 billion in assets under management (AUM), representing more than 85% of all ETF assets in Canada. The deal is still subject to regulatory approval.
The two companies have a somewhat complimentary line-up of ETFs. iShares ETFs largely use the more traditional indexing methodology where the indexes are constructed based on market capitalization, while Claymore’s ETFs are built using a process known as fundamental indexing. This means the indexes are constructed using more fundamental factors such as earnings, sales and cash flows. Both firms also have exposure to a wide range of fixed income and sector ETFs.
For investors, we don’t expect much change in the near term. We may see some fund mergers in the fixed income and sector areas as a way to help cut costs and realize operational efficiencies, but we fully expect that the iShares and the RAFI products will continue to be sold as they are. This will allow investors access to both the traditional and fundamentally constructed indexing methodologies. We also don’t expect there to be any meaningful changes in the cost structure of the ETFs.
Dave Paterson
THE BEST PORTFOLIO FUNDS
By Gordon Pape
In many cases, a simple balanced fund will generate better returns.
Let me make one thing clear from the outset: I don’t like portfolio funds, or packaged funds, or funds of funds, or wraps, or whatever you want to call them. Most of the ones I have looked at are mediocre at best. In many cases, a simple balanced fund will generate better returns.
That said, I recognize that, like King Canute, I cannot hold back the tide and the tide is definitely running in favour of these artificial creations. During 2011, portfolio funds outsold traditional stand-alone funds by a staggering margin of more than ten to one according to figures released by the Investment Funds Institute of Canada (IFIC). Collectively, we invested a net $19.4 billion in funds-of-funds last year compared to only $1.9 billion in stand-alone funds.
The traditional single funds still dominate the industry with $602.5 billion in assets while portfolio funds were at $167.2 billion at the end of 2011. But if the current trend continues, the packaged funds will overtake traditional stand-alone funds in a few years.
Why is this happening? I have not seen any evidence that investors have suddenly fallen madly in love with portfolio funds. We receive very few inquiries about them here at Mutual Funds/ETFs Update. So I have to believe that this surge in popularity is due primarily to financial advisors aggressively promoting the products.
They have two reasons to do so. First, it takes a lot less time and effort to sell an off-the-shelf wrap fund than it does to put together a diversified portfolio of individual funds. Second, the financial incentive for selling a packaged fund is greater. Typically, advisors receive an annual trailer fee of 1.25% of the value of the portfolio funds you own compared to 1% for an equity or balanced fund and 0.5% for a fixed-income fund. These are two very strong reasons for an advisor to steer you towards a portfolio fund.
But let’s assume that’s actually what you want anyway. You prefer the simplicity of one-stop fund shopping and you don’t care whether your advisor makes a little more money (or you don’t have an advisor and are doing it yourself). Which are the best portfolio funds out there? Here are some that I like.
Mawer Canadian Balanced Retirement Savings Fund. Very few financial advisors will mention this one to you and some may not even sell it. The reason is that Mawer Investment Management, which is based inCalgary, is a small, independent house that does not pay trailer fees or charge sales commissions. However, if you buy units through an advisor, he or she may levy a sales commission, which is negotiable.
Despite the name, this fund falls into the Global Neutral Balanced category. It invests primarily in units of other Mawer funds with a small percentage of the holdings in Government of Canada bonds. About one-third of the assets are in the Mawer Canadian Bond Fund with about 15% each in the Mawer Canadian Equity Fund, Mawer World Investment Fund, and Mawer U.S. Equity Fund. Another 7% is in the small-cap Mawer New Canada Fund with the rest sprinkled around.
The fund’s performance record is outstanding. It has beaten the category average in every time frame from one month to 20 years, a feat that very few funds can match. Over the three years to the end of December, the fund produced an average annual compound rate of return of 9.6% and a 20-year average annual return of 7.7%.
Added advantages include a low MER of 0.98% and monthly distributions, although they are small. This is a good choice for both RRSPs and RRIFs and I give it a top $$$$ rating. The code is MAW104.
Meritage Balanced Income Portfolio. This packaged fund from National Bank is made up of nine third-party funds and it has beaten the averages for the Canadian Neutral Balanced category by wide margins. The reason is that several of the funds in this portfolio are outstanding performers in their own right, such as Beutel Goodman Income Fund, TD Canadian Bond Fund, CI Signature Dividend Fund, RBC Canadian Dividend Fund, and Mackenzie Cundill Value Fund.
The fund is nicely balanced with 46.5% in stocks, 44.5% in bonds, and the rest in cash and “other”. Returns have been very good. The fund gained 3.5% in 2011 and showed a three-year average annual compound rate of return of 10.4% to Dec. 31 compared to a category average of 7.6%.
This fund pays monthly distributions which will be $0.0428 per unit in 2012 (about $0.51 per year). Based on a recent net asset value (NAV) of $8.63, that projects to a yield of almost 6%.
This fund is sold through National Bank Securities so there are optional front or back-end sales commissions. The MER is 2.3% and the minimum initial investment is $5,000. For more information on the Meritage Portfolios go to www.meritageportfolios.com/meritage_en/inv/index.htm. Rating: $$$$.
Meritage Growth Income Portfolio. You’ll find many of the same holdings in this companion Meritage fund but the allocations are different. This portfolio is more heavily weighted to stocks (about 60% of assets). For example, the largest single holding is the Dynamic Equity Income Fund (20.4% of total assets) whereas Beutel Goodman Income Fund and TD Canadian Bond Fund dominate the Balanced Income Portfolio, each with about 17% of the assets.
Because of the higher equity allocation, this fund did not do as well in 2011 (+2.1%) as its stablemate but its three-year average annual return of 11.1% is better than that of the Balanced Income Portfolio.
The monthly distribution is slightly higher than that of the Balanced Income Portfolio at $0.0437 per unit (about $0.52 annually). However, because of the fund’s lower NAV of $8.15, the yield is about half a point higher at 6.43%.
This is the better choice if you prefer a more aggressive approach but the risk is somewhat higher than with the Balanced Income Portfolio. I also give this a $$$$ rating.
iShares Diversified Monthly Income Fund (TSX: XTR). If you would prefer an ETF portfolio, this is an excellent choice. It invests in nine iShares funds, with an emphasis on the equity side (71% of assets). The largest positions, at slightly more than 14% each, are in the iShares S&P/TSX 60 Index Fund, iShares Dow Jones Canada Select Dividend Fund, and iShares S&P/TSX Capped REIT Income Fund. There are five bond ETFs in the mix but all with positions of less than 10%.
Although this is really an equity weighted balanced fund, it has been slotted into the Canadian Equity category so its recent results look better than they should when compared to the group average. For example, in 2011 this fund gained 6.4% compared to a loss of 10.9% for the category and 8.7% for the TSX. Over the past three years the average annual gain was a very impressive 20% compared to a category average of 10.3%.
As good as those numbers are, be aware that there is considerable risk here. The fund lost almost 36% over the 12 months to Feb. 28/09 when the credit crunch drove down world stock markets. So if you put money here, be sure you can handle the risk.
There is good cash flow – the fund pays monthly distributions of $0.06 a unit ($0.72 a year) for a projected 12-month yield of 5.9% based on a recent price of $12.28. The MER is 0.55%. Rating: $$$$.
The bottom line: As I said at the beginning, most portfolio funds are best ignored. But there are exceptions, as we’ve seen here. So don’t dismiss the idea out of hand. Just be sure that the fund you buy is one of the leaders.
RECOMMENDED LIST REVIEW
By Dave Paterson, CFA
41 out of our 46 picks in the black in the quarter!
After coming off one of the ugliest quarters in recent memory, global markets bounced back, posting decent gains in the final quarter of the year.U.S.stocks were the big winners, with the S&P 500 rising 8.6% in Canadian dollar terms. The top performer was the small and mid cap focused Russell 2000 which gained 13.3% in Canadian dollar terms. The S&P/TSX Composite Index rose by 4.6%, while International stocks posted a modest 0.4% rise.
Canadian bonds continued on their torrid pace, adding another 2.1% in the fourth quarter to finish the year with a gain of nearly 10%. Looking at the current environment, it is very unlikely that those types of returns will be repeated in 2012 in the fixed income market.
It was a very positive quarter for our Recommended List of Funds with 41 out of our 46 funds posting positive gains for investors and nearly 60% of the funds outpacing their benchmarks.
Looking ahead, many of the key factors which drove the markets in 2011, mainly the European sovereign debt crisis and a slowing global economy, will continue to drive the markets in 2012. As a result, it is our expectation that market volatility will remain high. Given this, it is our opinion that investors should focus on quality.
Fixed income should continue to play a key role in investors’ portfolios in 2012 as a buffer against the elevated levels of volatility. We don’t expect a meaningful increase in interest rates during the year so investors should focus on nimble, high quality, corporate focused bond funds that allow the managers the flexibility to adjust the portfolio to benefit from the environment.
For equities, again, we believe the focus should be on quality. Investors should look for high quality, large cap funds where the managers focus on dividends. These types of funds should hold up better during periods of elevated volatility. Further, given the continued uncertainty inEurope, we feel that investors should look to North American focused investments.
Funds to Buy
Here is a rundown of some of the funds on our list that we regard as a “Buy” in the current market environment.
CI Signature High Income (CIG 686) – This high quality global neutral balanced fund is a new addition to our list. Managed by Eric Bushell and his Signature Team, the fund has the objective of generating a high level of income and long term capital growth. This is a fund that has excelled at both. It pays investors a monthly distribution of $0.07 per unit, which works out to an annualized yield of approximately 6.1% at current prices. Investors have also been rewarded with strong first quartile performance from the fund since its inception. As of December 31, the fund held nearly 60% in cash and fixed income and 30% in high yielding Canadian securities such as REITs and energy trusts. The fund carries a low MER of 1.61%. This is a great fund for most investors, as it is relatively conservative yet offers a high income yield and strong growth potential.
BMO Guardian Enterprise Fund (GGF 464) – Another new addition to our list, this Canadian small/mid cap fund is virtually identical to the highly respected Mawer New Canada Fund, which has been capped to new investors for some time. While there may be some differences between the holdings, the overwhelming majority of the fund will be the same. It is managed by Martin Ferguson, using a GARP approach. The portfolio will tend to be fairly concentrated, holding less than 60 names with the top 10 currently making up 56% of the fund. The MER of the fund is 2.25%, which is low for the category but is higher than the 1.46% charged by the Mawer New Canada. This is a great fund for medium to high risk investors seeking some small cap exposure in their portfolios.
Fidelity Canadian Large Cap (FID 231) – First recommended on our October 2011 list, this Canadian focused large cap fund remains one of our top picks for the current environment. Manager Daniel Dupont employs a very active, blended approach, using both growth and value factors when selecting stocks for the fund. He looks to identify quality large cap stocks that are trading at a discount to intrinsic value. The result is a fairly concentrated portfolio of high quality stocks. The fund currently holds 54% in Canadian equities, 33% inU.S. equities and 10% in international equities. Given the outlook for equity markets, the manager’s active management style combined with his large cap focus makes this a good core equity fund for most investors.
IA Clarington Canadian Conservative Equity (CCM 1300) – Another recent addition to our list, this Canadian equity fund is well suited for conservative, long term investors who are looking to add equity exposure, but are also looking for good downside protection. The team at Leon Frazer & Associates looks for companies with a demonstrated history of growing dividends paid to investors over time. The fund is managed with an eye to minimizing volatility. As a result, the fund is likely to underperform when markets are rising sharply, but will earn its management fee when markets are falling or are volatile.
Steadyhand Income Fund (SIF 120) – Added to our Recommended List in October 2010, this fixed income balanced fund is a great fund for the current environment. It has a target asset mix of 75% fixed income and 25% high yielding equities, which will consist mainly of REITs and high yielding stocks. The majority of the fixed income component is invested in corporate bonds. Performance has been strong both on an absolute and risk adjusted basis, posting a three year return of 13.3%. Going forward, we don’t expect double digit returns from this fund, but we do expect a continuation of strong risk adjusted returns and relatively low levels of volatility. This is a good fund for conservative investors. Because of the equity weighting and the corporate bond weighting, we can also see this fund used within the fixed income component of a well diversified portfolio as a way to help preserve value in a rising interest rate environment.
National Bank Mortgage Fund (NBC 816) – For investors who are looking for a good parking place for their money but don’t want to lock into a GIC or face the dismal returns of a money market fund, this fund is a great choice. It invests predominantly in a mix of mortgage backed securities and other fixed income securities. You won’t make a lot of money in this fund, but you won’t lose much either. The fund has never lost money over a 12 month period.
PH&N Total Return Bond Fund (PHN 340) – This is a fund that is managed by a very strong team, has a very low MER of 0.60%, and allows more flexibility than the PH&N Bond Fund. This flexibility allows the managers to be a little more tactical in their approach, meaning that they can move in and out of fixed income sectors more quickly and with more conviction than they can with the PH&N Bond Fund. A downside to that flexibility is the potential for higher volatility. This is a great fund to use as a core fixed income position in a well diversified portfolio.
PH&N Short Term Bond & Mortgage (PHN 250) – This is a fund that has been on our Recommended List for more than 11 years. It vies with the National Bank Mortgage Fund for the title of Safest Fund on the list right now. 96% of the fund is invested in securities with a maturity of less than five years and 78% of the bonds have a credit rating of A or better. The fund pays quarterly distributions of $0.08 per unit with a capital gains payout at year-end. The MER is a low 0.59% and there are no load charges. The 10-year average annual compound rate of return is 4.3%. This is an outstanding choice for low-risk investors.
Dynamic American Value (DYN 041) – First added to our list in August 2006, we upgraded this fund to a Buy last quarter. While the fund underperformed both the index and the peer group in the quarter, we are maintaining our Buy rating. In September, the manager had nearly half the fund in cash. Throughout the quarter, this cash was deployed, as the fund is now 91% invested inU.S. stocks. The manager has an excellent track record in dealing with portfolio volatility and has excellent long term performance numbers. Given our expectation for higher levels of volatility, this fund with its active approach, value focus and large cap exposure should not disappoint over the medium to longer term. We like this fund as a coreU.S. holding for most investors.
Funds to Sell
Front Street Energy Growth Series 1 (FSC 100) – This fund is a Labour Sponsored Investment Fund that invests in energy and energy related industries such as oil and gas, fuel cells, power generation and wind power. While performance has been strong for an LSIF, absolute performance has been disappointing. The MER is 4.87%, which while low for an LSIF, is still in my opinion obscene, particularly when the fund has lost an average of 5.2% per year. Considering that, we are recommending that investors sell ONLY IF THEY HAVE HELD THE FUND FOR A MINIMUM OF 8 YEARS to ensure that there will be no government claw back of the tax credit.
Dynamic Power Balanced (DYN 001) – While this fund has posted decent long term return numbers, it is our opinion that the level of volatility is too high compared to the expected return. Given our expectation of an extended period of elevated volatility, we think that this fund will be a wild ride for investors. Therefore we are recommending that readers sell their holdings. If readers still would like exposure to this type of fund, we would suggest buying 60% of the Dynamic Power Canadian Growth Fund and 40% in the PH&N Total Return Bond Fund, which will provide a similar investment experience at a much lower cost.
CIBC Monthly Income (CIB 512)
David Graham took over the lead management duties of this fund in December 2007. Since his arrival, the fund has been pretty much a middle of the road performer. While it pays out a monthly distribution of $0.06 per month and it has a below average MER, it is our opinion that there are better monthly income and balanced funds available to investors.
RECOMMENDED LIST
2012 MODEL PORTFOLIO REVIEW
By Dave Paterson, CFA
Market uncertainty and high volatility set the stage for 2012
For many investors, 2011 was a year that they would like to forget. Volatility and uncertainty ruled the day as most developed markets, with the exception of theU.S., posted losses. North American fixed income markets were strong, as investors sought safe haven from the storm. The first half of 2012 is expected to be a copy of the latter half of 2011.
Despite the uncertainty and volatility, our portfolios fared well. All the portfolios finished in positive territory, except for our Growth Portfolio, which lost 2.8% for the year. Given the high equity weighting of the portfolio, this was not unexpected nor is it an immediate cause for concern.
For the benefit of new readers, the following portfolios were created on January 1, 2009 with an initial value of $25,000 each. All mutual funds and ETFs are eligible for inclusion except those which are only available to “sophisticated investors” through offering memorandum. Here is a quick summary of the objectives of each portfolio.
The Ultra-Safe Portfolio: This portfolio is based on the principles outlined in Gordon’s book Sleep-Easy Investing. It is designed for people who don’t want to worry about their money but are looking for better returns than they’ll get from GICs or money market funds. If it is used in a registered account, you’ll have to substitute for the RBC Monthly Income Fund, which cannot be held in RRIFs, RRSPs, etc.
The Non-Registered Defensive Portfolio: There’s a little more risk and extra cash flow in this portfolio. It is best suited to non-registered accounts where safety and income are the main priorities. The fund targets an average annual compound rate of return of between 4% and 6%.
The RRSP Portfolio: This portfolio is structured in much the same way as a conservatively managed pension plan. Risk is kept to a reasonable level consistent with a long-term annualized growth target in the 6% to 7% range.
The RRIF Portfolio: Cash flow and capital preservation are the goals. The portfolio is designed to provide enough income to avoid dipping into capital for as long as possible, while shielding investors from heavy losses in market downturns. The target return is about 6% a year although so far the return has averaged 9.0% per year.
The Growth Portfolio: This is suitable for investors seeking higher returns over the long term and who are willing to accept more risk. We aim for a compound annual growth rate of 8% to 10%. To date, the return has averaged 8.2% per year. This target allows us to maintain risk at reasonable levels. We avoid highly speculative funds.
Here are the latest results, to December 31:
ULTRA SAFE PORTFOLIO
| Fund Name |
Weight |
6 Month Return |
Value |
|
|
|
|
|
| PH&N Canadian Money Market Fund |
10% |
0.26% |
$2,845.19 |
| PH&N Short Term Bond and Mortgage |
15% |
2.09% |
$4,345.68 |
| National Bank Mortgage |
15% |
2.54% |
$4,364.84 |
| CIBC Canadian Short Term Bond Index |
10% |
2.34% |
$2,904.22 |
| Beutel Goodman Income |
15% |
5.51% |
$4,491.26 |
| PH&N Total Return Bond |
15% |
6.11% |
$4,516.80 |
| iShares DEX All Corporate Bond Index |
10% |
4.95% |
$2,978.28 |
| RBC Monthly Income |
10% |
0.08% |
$2,840.08 |
| Totals |
100% |
|
$29,286.35 |
|
|
|
|
PERFORMANCE TO DATE
| Initial value (January 1, 2009) |
$25,000.00 |
| Value at last review (June 30, 2011) |
$28,378.11 |
| Current value (December 31, 2011) |
$29,286.35 |
| Change since last review |
$908.24 |
| % change since last review |
3.20% |
| % change since inception (3 yrs) |
17.15% |
COMMENTS: The portfolio continued to do exactly what it was designed to do – protect capital while generating a return higher than what is offered by a GIC. All the funds were positive during the period, although the RBC Monthly Income was barely in the black. The bond funds posted stellar gains, which is unlikely to be repeated in the next six months.
CHANGES: Given the strong run up in the bond funds, we are taking a bit of money off the table. We are reducing the weightings of the PH&N Total Return Bond and the Beutel Goodman Income Fund to 10% each. We are increasing the weighting of the CIBC Canadian Short Term Bond Index Fund to 15%, and are upping the RBC Monthly Income Fund to 15%. This results in no net increase in expected risk to the portfolio, but allows for a slightly higher return.
REVISED ULTRA SAFE PORTFOLIO
| Fund Name |
Weight |
|
|
|
| PH&N Canadian Money Market Fund |
10% |
| PH&N Short Term Bond and Mortgage |
15% |
| National Bank Mortgage |
15% |
| CIBC Canadian Short Term Bond Index |
15% |
| Beutel Goodman Income |
10% |
| PH&N Total Return Bond |
10% |
| iShares DEX All Corporate Bond Index |
10% |
| RBC Monthly Income |
15% |
| Totals |
100% |
|
|
DEFENSIVE NON REGISTERED PORTFOLIO
| Fund Name |
Weight |
6 Month Return |
Value |
|
|
|
|
|
| PH&N Canadian Money Market Fund |
10% |
0.26% |
$3,111.31 |
| iShares DEX Short Bond Index Fund |
15% |
2.72% |
$4,781.47 |
| National Bank Mortgage Fund |
10% |
2.54% |
$3,182.06 |
| PH&N Total Return Bond Fund |
10% |
6.11% |
$3,292.85 |
| Steadyhand Income |
15% |
3.47% |
$4,816.18 |
| Mackenzie Sentinel Income (Series B) |
10% |
1.33% |
$3,144.51 |
| BMO Guardian Monthly Dividend Classic |
10% |
-0.23% |
$3,096.10 |
| RBC Monthly Income Fund |
10% |
0.08% |
$3,105.72 |
| Fidelity Canadian Balanced |
10% |
-2.23% |
$3,034.04 |
| Totals |
100% |
|
$31,564.25 |
|
|
|
|
PERFORMANCE TO DATE
| Initial value (January 1, 2009) |
$25,000.00 |
| Value at last review (June 30, 2011) |
$31,032.40 |
| Current value (December 31, 2011) |
$31,564.25 |
| Change since last review |
$531.85 |
| % change since last review |
1.71% |
| % change since inception (3 yrs) |
26.26% |
COMMENTS: Two funds, the Fidelity Canadian Balanced Fund and the BMO Guardian Monthly Dividend Fund, lost money in the past six month period. Despite this, the portfolio managed to squeeze out a return of 1.71%. Given the short term nature of the bulk of the fixed income holdings, this is a respectable gain.
CHANGES: We are making two changes to the portfolio to try to capture a bit of excess return without substantially increasing the risk profile. To do this, we are cutting the weight the iShares DEX Short Bond Index Fund and the Steadyhand Income Fund from 15% to 10%. With the proceeds, we are increasing the weight of the RBC Monthly Income Fund and the Fidelity Canadian Balanced Fund to 15% each, from 10%.
REVISED DEFENSIVE NON REGISTERED PORTFOLIO
| Fund Name |
Weight |
|
|
|
| PH&N Canadian Money Market Fund |
10% |
| iShares DEX Short Bond Index Fund |
10% |
| National Bank Mortgage Fund |
10% |
| PH&N Total Return Bond Fund |
10% |
| Steadyhand Income |
10% |
| Mackenzie Sentinel Income (Series B) |
10% |
| BMO Guardian Monthly Dividend Classic |
10% |
| RBC Monthly Income Fund |
15% |
| Fidelity Canadian Balanced |
15% |
| Totals |
100% |
RRSP PORTFOLIO
| Fund Name |
Weight |
6 Month Return |
Value |
|
|
|
|
|
| PH&N Canadian Money Market |
10% |
0.26% |
$2,971.71 |
| PH&N Short Term Bond and Mortgage |
15% |
2.09% |
$4,538.92 |
| Beutel Goodman Income |
15% |
5.51% |
$4,690.98 |
| PH&N Total Return Bond |
10% |
6.11% |
$3,145.10 |
| Steadyhand Income Fund |
10% |
3.47% |
$3,066.72 |
| BMO High Yield US Corporate Bond |
10% |
-0.84% |
$2,939.10 |
| Fidelity Canadian Disciplined Equity |
15% |
-0.11% |
$4,441.28 |
| BMO Guardian Monthly Dividend Classic |
15% |
-0.23% |
$4,435.78 |
| Totals |
100% |
|
$30,229.59 |
|
|
|
|
PERFORMANCE TO DATE
| Initial value (January 1, 2009) |
$25,000.00 |
| Value at last review (June 30, 2011) |
$29,640.01 |
| Current value (December 31, 2011) |
$30,229.59 |
| Change since last review |
$589.58 |
| % change since last review |
1.99% |
| % change since inception (3 yrs) |
20.92% |
COMMENTS – The portfolio was up by nearly 2%, despite having three of the funds lose money. The biggest contributors to the portfolios positive performance were the PH&N Total Return Bond Fund and the Beutel Goodman Income Fund.
CHANGES – We are making a number of changes within the portfolio in an effort to gain a bit more return without increasing the risk profile of the portfolio. The biggest change we’re making is to switch out the Fidelity Canadian Disciplined Equity Fund and switch in the Fidelity Canadian Large Cap Fund. The reason for this is twofold. First, given the expectation of continued high levels of volatility, we believe an actively managed fund will hold up better. The Canadian Large Cap Fund is more actively managed than the Disciplined Equity, which allows the manager more flexibility in volatile times. Second, the fund is able to invest up to 49% of the fund outside ofCanada, which will bring a bit more geographic diversification into the portfolio. We have also adjusted the weightings of a number of the other funds in the portfolio. The end result is a portfolio with a higher expected return profile and a lower risk profile.
REVISED RRSP PORTFOLIO
| Fund Name |
Weight |
|
|
|
| PH&N Canadian Money Market |
5% |
| PH&N Short Term Bond and Mortgage |
15% |
| Beutel Goodman Income |
15% |
| PH&N Total Return Bond |
15% |
| Steadyhand Income Fund |
15% |
| BMO High Yield US Corporate Bond |
5% |
| Fidelity Canadian Large Cap Fund |
15% |
| BMO Guardian Monthly Dividend Classic |
15% |
| Totals |
100% |
RRIF PORTFOLIO
| Fund Name |
Weight |
6 Month Return |
Value |
|
|
|
|
|
| PH&N Canadian Money Market |
10% |
0.26% |
$3,193.71 |
| PH&N Short Term Bond and Mortgage |
15% |
2.09% |
$4,878.01 |
| Beutel Goodman Income |
15% |
5.51% |
$5,041.42 |
| iShares DEX All Corporate Bond Index |
10% |
4.95% |
$3,343.11 |
| BMO High Yield US Corporate Bond |
10% |
-0.84% |
$3,158.67 |
| Mackenzie Sentinel Income B |
15% |
1.33% |
$4,841.69 |
| BMO Guardian Monthly Dividend Classic |
10% |
-0.23% |
$3,178.10 |
| Fidelity Monthly Income |
15% |
-0.91% |
$4,734.66 |
| Totals |
100% |
|
$32,369.37 |
|
|
|
|
|
|
|
|
|
PERFORMANCE TO DATE
| Initial value (January 1, 2009) |
$25,000.00 |
| Value at last review (June 30, 2011) |
$31,854.29 |
| Current value (December 31, 2011) |
$32,369.37 |
| Change since last review |
$515.08 |
| % change since last review |
1.62% |
| % change since inception (3 yrs) |
29.48% |
COMMENTS – Again, the biggest contributors to performance were the fixed income focused funds, namely the Beutel Goodman Income Fund and the iShares DEX Corporate Bond Index ETF. The Fidelity Monthly Income Fund and BMO Guardian Monthly Dividend Fund were marginally lower. The portfolio did manage to gain 1.6% in the latter half of the year.
CHANGES – The portfolio is fairly well positioned for the current environment. We are making one minor change, cutting the weighting in the Mackenzie Sentinel Income Fund to 10% and increasing the BMO Guardian Monthly Dividend Fund to 15%. This provides a marginally higher yield without increasing the risk profile of the portfolio.
REVISED RRIF PORTFOLIO
| Fund Name |
Weight |
|
|
|
| PH&N Canadian Money Market |
10% |
| PH&N Short Term Bond and Mortgage |
15% |
| Beutel Goodman Income |
15% |
| iShares DEX All Corporate Bond Index |
10% |
| BMO High Yield US Corporate Bond |
10% |
| Mackenzie Sentinel Income B |
10% |
| BMO Guardian Monthly Dividend Classic |
15% |
| Fidelity Monthly Income |
15% |
| Totals |
100% |
|
|
GROWTH PORTFOLIO
| Fund Name |
Weight |
6 Month Return |
Value |
|
|
|
|
|
| PH&N Total Return Bond |
10% |
6.11% |
$3,510.05 |
| iShares S&P/TSX Completion Index ETF |
10% |
-7.01% |
$3,076.04 |
| Fidelity Canadian Disciplined Equity |
15% |
-0.11% |
$4,956.63 |
| Mawer Canadian Equity |
15% |
-6.11% |
$4,658.72 |
| Beutel Goodman Small Cap |
10% |
-11.23% |
$2,936.45 |
| Beutel Goodman American Equity |
10% |
1.19% |
$3,347.30 |
| MawerU.S.Equity |
10% |
3.20% |
$3,413.78 |
| Mackenzie Cundill Value |
10% |
-16.79% |
$2,752.53 |
| Mawer World Investment |
10% |
-10.20% |
$2,970.52 |
| Totals |
100% |
|
$31,622.03 |
|
|
|
|
PERFORMANCE TO DATE
| Initial value (January 1, 2009) |
$25,000.00 |
| Value at last review (June 30, 2011) |
$33,079.31 |
| Current value (December 31, 2011) |
$31,622.03 |
| Change since last review |
-$1,457.28 |
| % change since last review |
-4.41% |
| % change since inception (3 yrs) |
26.49% |
COMMENTS – The portfolio was down by more than 4.4% during the second half of 2011, with Cundill Value, Beutel Goodman Small Cap and Mawer World Investment being the biggest drags on performance. The 6.1% gain in the PH&N Total Return Bond Fund helped temper losses.
CHANGES – We are making a number of changes to the portfolio for the upcoming period. The first change is that we are substituting the Fidelity Canadian Large Cap in for the Fidelity Canadian Disciplined Equity. Our rationale is the same as it is for our change to the RRSP Portfolio which is broader geographic exposure and active management. We are also selling out our position in the iShares S&P/TSX Completion Index. The main reason for this is that we believe that for the current volatile environment, an actively managed fund will fare better than a passive fund. We are also tweaking the weightings on a number of funds, increasing Beutel Goodman American Fund and Mawer World Investment Fund to 15% each.
REVISED GROWTH PORTFOLIO
| Fund Name |
Weight |
|
|
|
| PH&N Total Return Bond |
10% |
| Fidelity Canadian Disciplined Equity |
15% |
| Mawer Canadian Equity |
15% |
| Beutel Goodman Small Cap |
15% |
| Beutel Goodman American Equity |
10% |
| MawerU.S.Equity |
10% |
| Mackenzie Cundill Value |
10% |
| Mawer World Investment |
15% |
| Totals |
100% |
Editor and Publisher: Dave Paterson
Circulation Director: Kim Pape-Green
Customer Service: Katya Schmied, Terri Hooper
Gordon Pape’s Mutual Funds Update is published monthly.
Copyright 2012 by Gordon Pape Enterprises Ltd. and Paterson & Associates
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