New income funds to watch
The seemingly insatiable demand for income products has sparked the creation of three intriguing new income funds in recent months, one of which is the first of its kind in Canada.
It’s the GGOF Asian Growth and Income Fund and it gives investors who like the prospects for China and other Asian countries a different type of option. Instead of focusing exclusively on growth stocks, the portfolio emphasizes dividend-paying equities and U.S.-dollar denominated convertible bonds. This mix is designed to provide both growth potential and moderate income with less volatility than the average Far East fund.
This could be a winner for GGOF. Everybody seems to want a piece of the China action these days. I saw the same phenomenon a decade ago, but then the enthusiasm faded. Now it’s back again and the few dedicated China funds available to Canadian investors have been doing well. However, these funds can be highly volatile. For example, the AGF China Focus Fund, which was very strong in 2003, lost money in four of the past seven years prior to that. The GGOF fund, although it won’t invest exclusively in China and Hong Kong, will provide good exposure to ose markets with what should be less risk.
The fund is managed by San Francisco-based Paul Matthews, who has run a similar fund for U.S. investors for several years. It has been an outstanding performer, with a five-year average annual return of 22.3 per cent to Sept. 30. Morningstar gives it a top five-star rating over all time frames.
The GGOF fund was launched in September, so it has no significant performance record yet.
More conventional funds
The Franklin Templeton organization has weighed in with two more conventional income funds. Both are part of the Bissett family, which has pretty good track record with products of this type.
Of special interest is the new Bissett Income Trust and Dividend Fund which has a target asset mix of 60 per cent income trusts and 40 per cent dividend-paying equities. The income trusts side of the portfolio is managed by Leslie Lundquist, who runs the very successful Bissett Income Fund. She uses a conservative, bottom-up approach in selecting securities. Over the three years to Nov. 30, it produced an average annual gain of 19.1 per cent but it is now closed to new investors.
The inclusion of dividend-paying stocks in the new fund provides for greater diversification and will benefit investors if the income trusts market weakens. That part of the portfolio will be run by Juliette John, who manages the Bissett Dividend Income Fund. Unfortunately, I’m not impressed with its performance, either from a cash flow or a total returns perspective, so we’ll watch and see how well this marriage works.
The second newcomer is the Bissett Canadian Short Term Bond Fund. It will invest primarily in fixed-income securities with maturities of less than five years, which should make it a good choice for conservative investors. Both funds will pay monthly distributions.
If any of these funds interest you, discuss them with a financial advisor before making an investment decision.