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What are we looking for?

High-performing investment funds to reduce home country bias this RRSP season.

The screen

Recently, Morningstar published a study around home-country bias across Canadian-domiciled retail funds. The study noted that balanced funds (those that hold a mix between stocks and bonds) on average hold much more in Canadian-dollar-denominated assets than broad global benchmarks. Given that the performance of Canadian companies is tied to the Canadian economy, having too much of your portfolio invested locally introduces a double-whammy of risk if your employment status is also tied to the Canadian economy. The Canadian Pension Plan Investment Board (which manages all Canadians’ retirement portfolio) understands this concept well and their latest annual report showed a 14-per-cent allocation to Canada. The Morningstar study also noted that Canadian fund issuers are increasingly shifting their efforts away from Canadian balanced products (those that have 90 per cent of holdings in Canadian currency) and launching products with a global focus. Asset flows to global balanced categories confirm that investors are following. Today, we look for mutual funds and ETFs in the Global Neutral Balanced category (balanced funds which hold between 40 per cent to 60 per cent in stocks) that have performed well in the past and which Morningstar believes will continue to do well in the future. To find these funds, I used Morningstar Direct to screen for those that:

  • Have received a Morningstar Rating for Funds (informally known as the “star” rating) of four or five stars. This rating is an objective look-back at the risk-adjusted after-fee performance of the fund, relative to its category peers. The rating considers the past 10 years of performance history, if available, and puts greater emphasis on recent performance history. Our data show that although the star ratings are backward-looking, funds that have received five stars as a group outperform those that have received four stars, three stars, etc., in periods after receiving the rating. In other words, it’s more likely that a fund manager with a track record of outperforming peers will continue to outperform in the future, as compared with those that have historically underperformed peers.
  • Have received a Morningstar Medalist Rating of gold, silver, or bronze, isolating funds that Morningstar believes will produce excess after-fee returns in the future, based on our analysis of people (quality of the management team), parent (stewardship of the fund company), and process (robustness of investment decision making).
  • Have less than 20 per cent of the portfolio invested in Canadian stocks

Only ETFs, fee-based and DIY share classes of mutual funds were included in this search, noting that none include a bundled advice fee.

What we found

High-rated balanced funds

NameTickerMER (%)Morningstar Rating for FundsMorningstar Medalist RatingTotal Ret YTD (%)Total Ret 1 Yr (%)Total Ret Annlzd 3 Yr (%)Total Ret Annlzd 5 Yr (%)Total Ret Annlzd 10 Yr (%)Total Ret Annlzd 15 Yr (%)Inception Date Canadian Equity (%) U.S. Equity (%) International Equity (%) Fixed Income (%) Cash (%) Other (%)
BMO Balanced ETFZBAL-T0.20★★★★Bronze0.507.972.706.232/12/201914.728.916.939.10.20.2
Vanguard Balanced ETF PortfolioVBAL-T0.24★★★★Silver0.247.692.285.971/25/201817.926.615.539.60.40.0
iShares ESG Balanced ETF PortfolioGBAL-T0.25★★★★Silver1.7111.913.959/2/202017.729.313.339.10.60.0
Fidelity All-in-One Balanced ETF F0.55★★★★Silver1.0610.304.491/26/202114.429.414.737.91.52.2
Fidelity Global Monthly High Income ETFFCGI-T0.62★★★★★Silver-
Capital Group Global Balanced Canada F0.80★★★★Bronze1.577.002.506.098/31/20156.732.923.
Mawer Tax Effective Balanced A0.89★★★★Silver0.126.311.235.216.338.611/8/198818.519.322.
Dynamic Global Yield Private Pool F0.90★★★★Gold1.938.764.296.296/6/201413.730.419.431.23.61.7
Mawer Balanced A0.91★★★★Bronze0.
RBC U.S. Monthly Income Fund D0.95★★★★★Gold3.9210.504.276.577.917.757/3/20070.
RBC Select Balanced Portfolio F0.97★★★★Silver1.067.662.276.186.407.511/21/200814.725.319.
Fidelity US Monthly Income Ser F1.04★★★★★Silver1.616.
Fidelity Global Monthly Income Ser F1.08★★★★Silver1.465.851.745.336.578.664/18/20072.326.115.745.63.86.5
Fidelity NorthStar Balanced Sr F1.09★★★★Silver1.688.992.865.965/28/20142.
Fidelity Bal Mgd Risk Portfolio F1.10★★★★Bronze0.324.982.084.9511/16/201617.225.810.731.211.23.8
Dynamic Blue Chip Balanced F1.11★★★★Silver-0.985.780.406.517.137.951/6/20030.021.637.435.15.50.5
Manulife US$ Strategic Bal Yield F1.16★★★★★Bronze2.039.886.677.748.2412/18/20131.743.88.642.72.11.0
RBC Select Choices Balanced Port F1.18★★★★Silver2.118.963.106.087/4/201614.825.119.535.44.31.0
RBC Global Balanced Fund D1.33★★★★Silver0.827.111.985.865.816.667/3/200716.821.817.532.68.62.6

Source: Morningstar Direct |  Data as of Feb 13, 2024

The funds that qualified in the screen are listed in the table accompanying this article, alongside management expense ratios, trailing performance, inception dates, ratings and asset allocations. It is important to understand that a 50/50 mix of stocks and bonds (the midpoint for stock exposure in this category) is not ideal for every investor. Superconservative investors who are closing in on retirement would be well served to have a lower exposure to stocks to reduce risk, with the opposite being true for younger investors with long time horizons who can afford to take on much more risk. This said, many of the funds listed here are part of a broader family, offering different mixes of stocks and bonds to suit investors’ risk profiles.

This article does not constitute financial advice, it is always recommended to conduct one’s own independent research before buying or selling any of the funds or ETFs mentioned in this article.

Ian Tam, CFA, is director of investment research for Morningstar Canada.

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