What are we looking for?
The leaders and laggards over a decade among no-load Canadian balanced funds sold by the six big banks.
The search
We screened for the best and worst eight funds from the Canadian balanced, Canadian neutral balanced and Canadian fixed-income balanced categories for 10 years ended July 31. These categories vary from funds holding more than 60 per cent in equities versus bonds to less than 40 per cent in equities versus bonds. U.S. dollar, segregated, pooled, fund of funds and duplicate versions of these funds were excluded.
What did we find?
Monthly income funds, which aim to provide regular monthly payout as well as some capital appreciation, rose to the top of the heap over the decade. Interestingly, the annualized gain by the eight best performing balanced funds also outpaced the S&P/TSX total return of 3.5 per cent.
CIBC's Renaissance Canadian Monthly Income Fund emerged as the leader with an average annual 11.4-per-cent gain over 10 years. This return, however, is a bit misleading because it hasn't always been a balanced fund. It began as the Renaissance Canadian Income Trust Fund in 2002, but changed its name in 2006 after Ottawa changed the rules requiring income trusts to convert to corporations by 2011. The former equity fund's mandate was then expanded to include bonds and dividend-paying stocks. David Graham of CIBC Global Asset Management Inc. took over the fund last fall from manager Gaelen Morphet who ran it for most of its life before jumping ship to join Empire Life Insurance Co.
Excluding the CIBC fund, the TD Monthly Income Fund has been the star over a decade with an average annual return of 9.1 per cent. Doug Warwick of TD Asset Management Inc. has been the lead manager on it since 1998.
Among the laggards, CIBC Balanced was the worst performer with an average annual gain of 1.4 per cent. Manager Luc de la Durantaye took over the fund from Ms. Morphet last fall. He had been the lead manager before she took it over in 2006.
Lower fees can help returns as indicated by the fact the long-term leaders among the balanced funds all have a management expense ratio (MER) of less than 2 per cent. However, a low MER hasn't helped CIBC Balanced Index fund. Even though it only charges a 1.08-per-cent fee, this fund was tied with Scotia Canadian Balanced for the second-worst performance - a 1.8-per-cent average annual gain over 10 years.