Signature: Steady and solid

The CI fund line-up has become so cluttered that it is almost impossible for the ordinary investor to navigate through it. Even some professional advisors throw up their hands in dismay when faced with 1,298 separate types of units — that’s the number that shows up on The Fund Library website.

So let me try to make things a little easier for you. If you focus on just one fund family within CI, you’ll find the best the company has to offer. That family is Signature, overseen by Eric Bushell, who was named Equity Fund Manager of the Year in 2009 by Morningstar.

There is nothing flashy about the Signature line-up which perhaps explains why many people are not familiar with it. You won’t find big winners here but you won’t experience heavy losses either. Adjectives like “solid”, “steady”, and “dependable” best describe the funds in the Signature group.

Here are two of their best entries.

Signature Canadian Balanced Fund. This is one of the rare funds that you can put in your portfolio and forget about. It has been churning out respectable profits since it was launched in 1997, as the average annual compound rate of return since inception of 8 per cent shows. The latest one-year return, to Nov. 30, was 7.5 per cent.

During bad times, the defensive management style used by Manager Eric Bushell and his team minimizes investor risk. For example, during the high-tech crash, this fund lost only 3.3 per cent in 2001 and 7.3 per cent in 2002. In 2008, when most funds were being hammered, it fell 15.5 per cent. That was better than the average loss for the Canadian Neutral Balanced category or the benchmark index.

The portfolio is a mix of fixed-income securities (23.3 per cent as of Nov. 30), Canadian and foreign stocks (67.6 per cent), and cash (9.1 per cent). Stocks are of the blue-chip variety: major Canadian banks, energy companies such as Suncor and Talisman, and big mining firms like Barrick Gold and Freeport McMoRan.

The minimum initial investment is $500 (the same for all Signature funds). Code for the front-end A units is CIG685. Suitability: Conservative investors. My rating: $$$$.

Signature Dividend Fund. This is one of the few dividend funds that has a significant percentage of preferred shares in its portfolio. That reduces the overall risk but can also depress returns during periods when dividend-paying common stocks are performing well. This explains why the long-term returns from this fund are slightly below the peer group average – the 10-year average annual compound rate of return to Nov. 30 was 5.3 per cent, which was 81 basis points (0.81 per cent) below the category norm. But the slightly reduced return is compensated for by below-average volatility (i.e. less risk) and good cash flow – the fund pays monthly distributions of $0.04 a unit ($0.48 a year). The trailing 12-month cash yield to the end of November was 4.2 per cent.

As with the other Signature funds, the focus is on high-quality large-cap stocks such as TD Bank, Eli Lilly, JP Morgan Chase, and BCE. You won’t find any high-risk equities here. Code: CIG610. Suitability: Conservative, income-oriented investors. My rating: $$$$.

Ask a financial advisor if these funds are suitable for your needs.

Photo © Rob Friedman

Adapted from an article that originally appeared in Mutual Funds/ETFs Update, a monthly newsletter that provides advice on fund selection and strategies. For a three-month trial subscription for only $20 plus tax go here.