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What are we looking for?

Top-rated mutual funds run by top-rated investment teams.

The screen

Investors looking for long-term success stand to benefit from finding a mutual fund managed by a strong investment team. Strong teams generally have proven skill, relevant experience and appropriate resources to execute the investment mandate of a fund.

Factors to consider include whether the team works well together, has effective diversity of thought, how stable it is, whether workloads are manageable given the required responsibilities and the size of the team, and whether key person risk (the risk of relying too much on one person) is mitigated.

This does not necessarily mean that bigger and more tenured investment teams are better. In fact, that might not be the case at all. What it does mean is that the team is set up in a way that limits unexpected performance for investors.

At Morningstar, our Manager Research team includes an explicit component focused on assessing the overall quality of an investment team. We call this component the People Pillar, and rate each team reviewed as either Low, Below Average, Average, Above Average or High, depending on the efficacy of the team’s practices.

To highlight a few great mutual funds with top-rated teams, I used Morningstar Direct to screen more than 7,000 Canadian-domiciled mutual funds to find a selection of them to consider. The criteria include:

• A Morningstar Analyst People Pillar Rating of Above Average or High, indicating the fund is managed by a quality investment team.

• A Morningstar Medalist Rating of Bronze, Silver or Gold, indicating a forward-looking view of the fund’s ability to outperform its peer group and/or relevant benchmark on a risk-adjusted basis over a full market cycle.

• A Morningstar Rating of five stars. The star rating is an objective look back at a fund’s after-fee, risk-adjusted returns relative to the category to which the fund belongs. Though the measure is backward-looking, Morningstar’s research shows that over time and on aggregate, five-star funds continue to outperform four-star funds, three-star funds and so on, after receiving the rating.

• A top decile category rank over the past five years, indicating the funds selected have outperformed their peers over a long period.

• Funds are available in do-it-yourself classes (where there is no advice provided to investors and they pay no commissions or fees).

What we found

16 funds with top investment teams

NameMorningstar CategoryMER (%)Morningstar Rating OverallMorningstar Medalist RatingMorningstar Medalist Rating People PillarTotal Ret YTD CAD*Total Ret 1 Yr CAD*Total Ret Annlzd 3 Yr CAD*Total Ret Annlzd 5 Yr CAD*Total Ret Annlzd 10 Yr CAD*Total Ret % Rank Cat YTD** Total Ret % Rank Cat 1 Yr ** Total Ret % Rank Cat 3** Total Ret % Rank Cat 5 Yr**
Manulife Global Equity Priv Pool CCanada Fund Global Equity1.075GoldHigh9.1414.859.529.8012.151510275
Mawer Global Equity ACanada Fund Global Equity1.315GoldHigh8.9114.599.099.1511.951814369
RBC Global Dividend Growth Fund DCanada Fund Global Equity1.275GoldHigh0.636.2210.328.8411.649270218
RBC International Equity Cur Neutral DCanada Fund International Equity1.275GoldHigh10.1912.6612.316.729190178
RBC U.SCanada Fund US Small/Mid Cap Equity1.225GoldHigh6.6712.939.429.4212.93124512
RBC U.SCanada Fund Global Neutral Balanced0.95GoldHigh2.056.312.445.577.978913798
PH&N Canadian Income Fund DCanada Fund Canadian Dividend & Income Equity1.034SilverHigh3.902.2516.608.337.6827252110
PH&N Dividend Income Fund DCanada Fund Canadian Dividend & Income Equity0.994SilverHigh3.882.2316.728.397.9927251810
PH&N Inflation-Linked Bond Fund DCanada Fund Canadian Inflation-Protected Fixed Inc1.225SilverAbove Average-0.11-1.44-2.820.861.3455176
PH&N Monthly Income Fund DCanada Fund Canadian Neutral Balanced1.094SilverHigh3.291.759.045.585.17275245
RBC European Equity Fund DCanada Fund European Equity1.265SilverHigh10.3617.789.875.437.6468424510
RBC Life Science & Technology Fund DCanada Fund US Equity1.225SilverHigh18.2219.2210.3013.8718.2356553
RBC Managed Payout Soln-Enhanced Plu DCanada Fund Canadian Neutral Balanced1.135SilverHigh3.322.948.625.746.23475084
Beutel Goodman Core Plus Bond DCanada Fund Canadian Fixed Income0.694BronzeAbove Average2.180.24-2.131.301.551451128
Desjardins SocieTerra Cleantech ACanada Fund Global Small/Mid Cap Equity2.624BronzeHigh5.246.7811.327.684052223
Mawer Global Balanced ACanada Fund Global Equity Balanced1.094BronzeAbove Average6.339.334.666.1197769

Source: Morningstar
*Data as of May 23rd, 2023
**Data as of April 30th, 2023

The list above highlights 16 funds that met the screen’s criteria. Although there is diversity among asset classes represented, the list is strongly concentrated in funds managed by Royal Bank of Canada RY-T and its subsidiary, Phillips, Hager & North (PH&N). This could be an indication of a firm that fosters quality investment teams.

Short-term performance of the 16 funds is mixed, with only 14 funds being in the top quartile of their respective peer groups over the past year, despite all funds being top decile over the past five years. This is a reminder to investors that many strategies are long-term in nature and may not fare as well during shorter-term market movements.

This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.

Danielle LeClair, MFin, is director of manager research, Canada for Morningstar Research Inc.

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Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 17/04/24 2:05pm EDT.

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Royal Bank of Canada

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