With literally thousands of mutual funds available for sale in Canada, tyring to find a fund or mix of funds that will have the potential to deliver strong risk adjusted relative returns can be a very daunting task. Our Recommended List of Funds does a lot of that heavy lifting for you. We have analyzed more than 1500 funds and narrowed the investment universe down to our best ideas. This comprehensive report includes what we feel are the best funds in a wide range of asset classes, includes quick bullet points on the fund and the current environment, and provides ideas on how to put your own portfolios together. This tool is a great way to help reduce the time you spend selecting funds and building portfolios and gives you more time to build and maintain client relationships.
Below, you will find our Recommended List of Funds reports. Subscribers have access to the most current reports, which are updated quarterly. If you would like reports from 2009 or 2010, feel free to email us at info@paterson-associates.ca with your request.
Recommended List of Mutual Funds – April 2017
It was a decent quarter for our Recommended List of Funds, with only two of the 47 funds on our list finishing in negative territory. The best performers were international equity funds, and those with significant allocations to the technology sector. The laggards were both Canadian small and mid cap equity funds. Despite the market continuing to reward many higher beta names, we continue to emphasize quality and discipline with our Fund picks.
read moreETF Focus List – March 2017
There were no ETFs added or deleted during this period. Funds of note include PowerShares Senior Loan Index ETF (TSX: BKL.F), PowerShares Tactical Bond ETF (TSX: PTB), PowerShares FTSE RAFI Canadian Fundamental Index ETF (TSX: PXC), iShares U.S. Fundamental Index ETF (NEO: CLU), and iShares International Fundamental Index ETF (NEO: CIE)
read moreRecommended List of Mutual Funds – January 2017
The fourth quarter was a challenging one for bond investors, with yields spiking sharply. In Canada, the yield on the benchmark Government of Canada five-year bond rose by 49 basis points, ending the quarter at 1.11%. It was a similar story for the Canada ten-year which rose by 72 basis points, ending the quarter at 1.72%.
read moreETF Focus List – December 2016
Vanguard Canadian Aggregate Bond Index ETF (TSX: VAB) – This TSX traded ETF provides broad exposure to the Canadian bond market. It is designed to track the Bloomberg Barclays Global Aggregate Canadian Float Adjusted Bond Index, net of fees. The index is cap weighted and holds investment grade government and corporate bonds of Canadian issuers.
It is rather like the iShares Canadian Universe Bond Index (TSX: XBB), but there are some differences. The first is VAB has a higher exposure to government bonds than XBB. VAB holds around 80% in government bonds, which is equally split between provincial and federal/agency debt. In comparison, XBB holds 70% in government debt, with a very slight tilt towards federal/agency debt. Because of this, the average credit quality is higher with VAB. A drawback is the interest rate sensitivity is higher. The duration of VAB is 7.8 years, compared to 7.3 years for XBB. In practical terms, this means VAB is likely to be hit modestly harder in the event of a bump in yields. Given the market volatility of the past few weeks, this has played out as expected, with XBB dropping by 2.05% in November, while VAB was down 2.18%.
read moreRecommended List of Mutual Funds – October 2016
Capital Group U.S. Equity Fund (CIF 847 – Front End Units, CIF 867 – Low Load Units) – Historically, the U.S. equity market has been one of the most difficult to outperform, making picking an actively managed fund in the category rather difficult. More often than not, you’re better off just going with a low-cost index product for your U.S. equity exposure.
One fund that has grabbed my interest of late is the Capital Group U.S. Equity Fund, offered through the U.S. based Capital Group’s Canadian division. While the fund is only publishing a track record of just under three years in Canada, it is now modeled after the firm’s oldest portfolio, the Investment Company of America, a fund that was launched in 1933, and boasts a strong track record of performance.
read moreETF Focus List – September 2016
Additions
Vanguard Canadian Short Term Bond Index ETF (TSX: VSB) – This TSX traded ETF provides exposure to a portfolio of Canadian government and corporate bonds, that have a maturity that ranges between one and five years. It looks to track, on a net of fee basis, the performance of the Barclays Global Aggregate Canadian Government/Credit 1–5-year Float Adjusted Bond Index. The index is weighted by market capitalization.
Credit quality is high, with more than 55% of the fund rated AAA, 25% rated AA, and the balance A or BBB. Approximately 70% is invested in government or agency debt, with the balance being in corporate bonds. From a maturity perspective, nearly 30% comes due within one to two years, with the balance pretty even spread between the other yearly maturity buckets. This works out to an average maturity of 2.9 years, and an average duration of just 2.8 years. Geographically, it invests only in Canadian issues. The average yield to maturity is a mere 1.1%. With a management fee of 0.10%, the resulting MER is 0.11%, once taxes and other expenses are taken into account.
read moreRecommended List of Mutual Funds – July 2016
PowerShares 1 – 5 Year Laddered Corporate Bond Fund (AIM 53203– Front End Units) – In June, this laddered short term corporate bond fund underwent its annual reconstitution. When this happens, the five shortest duration bonds are removed from the index and replaced with ten bonds that have a term to maturity of five years are added in their place. The reason that ten bonds are replacing the five that were removed is last year, the index provider announced that over the next five years, the number of bonds in the index would be increased from 25 to 50. After the reconstitution, the fund held 35 bonds. I really see this as a positive, as the increased number of bonds increases the diversification, and reduces the security specific risk in the fund.
read moreETF Focus List – June 2016
Download PDF Version of this Report . Additions PowerShares S&P/TSX Composite Low Volatility ETF (TSX: TLV) – Low volatility funds and ETFs continue to be popular choices with investors. It’s not too difficult to understand why they are appealing, with the prospect of market like returns over the long term combined with lower downside. The problem I see with many of the low volatility mandates is that investors have flocked to these funds and ETFs, and have bid up the values of many of the stocks held in these products to very high...
read moreRecommended List of Mutual Funds – April 2016
. Download the PDF Version of the report here . List Changes . Additions Manulife Dividend Income Fund (MMF 4529 – Front End Units, MMF 4429 – DSC Units) – Managed by the team of Alan Wicks, Conrad Dabiet, and Jonathan Popper, this fund looks to assemble a diversified portfolio of businesses that are creating value at a pace faster than the broader equity markets. To do this, they use a bottom up, fundamentally driven process that seeks out businesses of any size that have high returns on invested capital. Each potential investment candidate...
read moreETF Focus List – March 2016
. Download a PDF Version of this Report Additions BMO Short Corporate Bond Index ETF (TSX: ZCS) – The bond market continues to be a challenging place for investors. Yields remain near historic lows, and the interest rate outlook is somewhat uncertain. In the U.S., it was a near certainty that the Federal Reserve would be moving rates higher several times over the year. It now appears that there is only a modest probability that we will see much in the way of increase rates. Closer to home, odds are we may see the Bank of Canada move...
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