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number cruncher

What are we looking for?

Top-rated mutual funds with top-rated investment processes.

The screen

When investors look at the performance of mutual funds, they are likely looking for something simple – are those performance numbers positive or negative? Considering why those numbers are positive or negative is also important. Why a fund performs a certain way can be the direct result of its investment philosophy and process. An understanding of these components can help investors better gauge if performance results are expected given the goal and method applied. This can be particularly helpful during periods of volatility, such as the one we have experienced since the collapse of Silicon Valley Bank earlier this month. A strong investment process is well-defined and consistently executed, and generally able to withstand short-term market shocks and reward investors over the long term.

A fund’s investment process can be nuanced. To help guide investors, Morningstar’s manager research team assigns ratings to Canadian funds and ETFs that include an explicit component focused on understanding their investment philosophy and process. We refer to this component as the “Process” pillar and rate each asset manager as either Low, Below Average, Average, Above Average or High, depending on the efficacy of their practices. To highlight a few great mutual funds available to Canadians with top-rated investment processes, I used Morningstar Direct to screen more than 3,400 Canadian-domiciled mutual funds and ETFs to find a selection of options to consider. The criteria include:

  • A Morningstar Quantitative or Analyst Process Pillar rating of High, indicating the fund has a clearly defined investment process and performance objective that is repeatable and implemented effectively.
  • A Morningstar star 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, etc., after receiving the rating.
  • A top quintile category rank month-to-date indicating the funds selected have outperformed their peers since March 1, 2023.

*Data as of March 23, 2023

What we found

Mutual Funds with Clearly Defined Investment Processes

NameMorningstar CategoryAnnual Report Management Expense Ratio (MER)Morningstar Quantitative RatingMorningstar Analyst RatingTotal Ret MTD (Daily) CADTotal Ret % Rank Cat MTD (Daily)Total Ret 1 Yr (Daily) CADTotal Ret % Rank Cat 1 Yr (Daily)Total Ret Annlzd 3 Yr (Daily) CADTotal Ret % Rank Cat 3 Yr (Daily)Total Ret Annlzd 5 Yr (Daily) CADTotal Ret % Rank Cat 5 Yr (Daily)
Dynamic Active Canadian Dividend ETFCanada Fund Canadian Dividend & Income Equity0.84Gold-3.2020-4.281123.264410.882
Fidelity True North Sr FCanada Fund Canadian Equity1.08Silver-2.2913-4.551721.84679.892
Fidelity Greater Canada Sr FCanada Fund Canadian Focused Equity1.11Silver-0.19141.93533.26119.201
PH&N Inflation-Linked Bond Fund FCanada Fund Canadian Inflation-Protected Fixed Inc0.37Gold2.281-5.20480.74101.361
RBC Canadian Mid-Cap Equity ICanada Fund Canadian Small/Mid Cap Equity0.71Gold-3.0018-9.413431.671610.657
Fidelity Floating Rate Hi Inc FCanada Fund Floating Rate Loans0.90Silver-0.261111.2618.63264.086
Manulife Global Equity Class FCanada Fund Global Equity1.08Gold1.48163.091216.28409.586
Dynamic U.S. Balanced Class Ser FCanada Fund Global Equity Balanced1.08Silver3.871-3.746512.473910.151
Dynamic Blue Chip Balanced FCanada Fund Global Neutral Balanced1.11Silver1.603-1.73289.39386.415
Manulife US Balanced Val Priv Trust FCanada Fund Global Neutral Balanced0.91Silver1.346-3.025814.8738.111
Manulife US Monthly High Inc FCanada Fund Global Neutral Balanced1.13Bronze1.337-3.246414.6247.911
Fidelity NorthStar Sr FCanada Fund Global Small/Mid Cap Equity1.13Silver0.3693.55718.40286.269
Dynamic Global Real Estate Series FCanada Fund Real Estate Equity1.22Gold-7.1216-15.141212.92305.278
RBC Life Science & Technology Fund FCanada Fund US Equity0.94Gold6.311-0.512118.914914.533
Canoe Defensive U.S. Equity Port Cl FCanada Fund US Equity1.25Silver1.09187.22217.256611.7012
Fidelity US Focused Stock FCanada Fund US Equity1.10Silver0.8620-8.197816.357512.039
RBC U.S. Mid-Cap Growth Equity Fund FCanada Fund US Small/Mid Cap Equity0.93Gold-1.731-2.102219.265910.781
Dynamic Active U.S. Mid-Cap ETFCanada Fund US Small/Mid Cap Equity0.78Gold-5.70172.33417.79667.5524


The list above highlights funds from 13 different mutual fund categories (as defined by the Canadian Investment Fund Standards Committee) from six different asset managers, indicating strong processes are not confined to a specific asset class or investment style. Although not explicitly screened for, each of these funds also earned a Bronze, Silver or Gold Morningstar Analyst or Quantitative Rating 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. Every fund on the list has delivered, with all but two ranking in the top decile of their respective categories over the past five years.

Note that the management expense ratios listed here are reflective of the f-share class. In the table, f-class (also known as fee-based share classes) shares exclude the cost of advice and are held in fee-based accounts where the adviser charges separately for advice.

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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