Find low risk funds for tough times
When stock markets head south, most equity and balanced funds do too. Managers find it tough to make money when almost every index in the world is falling.
But there are some exceptions. A few funds have never lost money over a calendar year since they were started, no matter what the economic situation. Others come close to having an unblemished record, and any losses they have suffered have been small.
Here’s a look at some of Canada’s top low-risk funds. If you’re not happy with the way your portfolio is performing, you might want to add some to your holdings.
Mackenzie Ivy Foreign Equity Fund:
Every fund in the Ivy family is relatively low risk. That’s the way they’re run, and a hallmark of lead manager Jerry Javasky. This one meets all our low-risk criteria. It has never lost money over a calendar year since it was launched in October 1992.
Globefund gives it a risk rating of 9.21, compared to 16.18 for the Global Equity category as a whole. The beta is a very low 0.29, compared to 1.00 for the benchmark MSCI World Index, as expressed in Canadian dollars. Add to this an outstanding performance record, which has seenhe fund outperform the average of its peers over every time frame, and you have a clear winner.
Mackenzie Ivy Canadian Fund:
The profile here is very similar to that of Ivy Foreign Equity. Both funds were launched at the same time, and Ivy Canadian also enjoys an unblemished record of steady calendar year profits since then. Risk rating is excellent and the beta comes in at 0.19, which is extremely low.
The record here is not completely unblemished, but this fund certainly ranks well up on the safety list. The last time it recorded a losing year was back in 1990, when it lost almost 10 per cent as world markets dived. But since then it has produced a decade of uninterrupted profits and the fund is even showing a gain in this difficult year.
As you might expect, the risk rating is very good and the beta quite low at 0.60, although significantly higher than that of Ivy Foreign Equity.
Next page: More low risk funds…
More low risk funds…
Beutel Goodman Balanced Fund:
Here again the record isn’t perfect, but it comes darn close. The only calendar year loss this fund has suffered since its launch in late 1990 was a tiny 0.3 per cent drop in 1994. Otherwise, it’s been clear sailing.
The downside is that the long-term returns from this conservatively-managed value fund are only slightly above average for the peer group. Over the decade to May 31, the fund showed an average annual gain of 8.7 per cent, compared to 8.4 per cent for the category as a whole.
Still, a slightly above average return with well below average risk has to be respected. You’ll need at least $10,000 to take a position in this one.
Bissett Canadian Balanced Fund:
This is actually a fund of funds, investing in other funds operated by this organization (now part of Franklin Templeton). Like the Beutel Goodman fund, it also has one blemish over the past decade, a loss of 1.8 per cent in 1994. Otherwise, every year has been profitable.
The difference is that this fund has generated higher returns. Ten-year average annual compound rate of return is 11.3 per cent, significantly higher than that of the Beutel Goodman Fund.
However, it should be noted that those results are for the original no-load “F” units, which had a low MER. Returns for the new “A” units are lagging well behind those of the “F” units over comparable periods. The message is that if you own the “F” units, keep them. We have reservations about the “A” units.
Mackenzie Ivy Growth and Income Fund:
It was very tough for balanced funds to make a profit in 1994, when both the stock and bond markets sagged at the same time. That was the only stumble for this fund as well, with a fractional loss of 0.7 per cent. Apart from that, investors have enjoyed a combination of below-average risk and above-average profits.
Adapted from an article that originally appeared in Mutual Funds Update, a monthly newsletter devoted to advice on how to invest successfully in funds. Read a free sample copy.