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What are we looking for?

Global-neutral balanced funds to consider when decreasing home-country bias.

The screen

Recently, my colleagues at Morningstar Canada published a study on Canadian-domiciled balanced funds (those that hold a mix of stocks and bonds), an important topic given that these products make up more than half of mutual fund and ETF assets in Canada. One of the key findings in the study is a clear-cut trend in fund companies’ propensity to launch funds with a global focus, and a decreased interest in domestic balanced funds. Moreover, the study also shows that asset flows over the past five years reflect Canadians’ willingness to invest globally. Whether this trend is investor-driven or fund-company-driven remains unclear. Either way, this is great news for Canadian investors as it reduces the degree of home-country bias in our portfolios. I’ve written in the past about how having an overexposure to domestic securities presents a “double whammy” of sorts when economic conditions get tough on the home front. For investors who are interested in looking at global balanced funds, I used Morningstar Direct to create a starter screen that looks for mutual funds and exchange-traded funds in the global-neutral balanced category. By definition, these funds hold between 40 per cent and 60 per cent in stocks (the remainder in bonds) and have less than 70-per-cent exposure to domestic securities. The screen had two criteria:

- A four- or five-star Morningstar Rating for Funds (also known as the “star” rating), indicating that the fund has historically outperformed respective category peers after fees, on a risk-adjusted basis. 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.

- A Morningstar Medalist Rating of gold or silver, 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).

For the purposes of this screen, only fee-based and DIY share classes of mutual funds were considered, both of which exclude the cost of advice and distribution.

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What we found

Global-neutral balanced funds

NameTickerMER (%)Morningstar Rating OverallMorningstar Medalist RatingTotal Ret YTD (Daily) CADTotal Ret 1 Yr (Daily) CADTotal Ret Annlzd 3 Yr (Daily) CADTotal Ret Annlzd 5 Yr (Daily) CADTotal Ret Annlzd 10 Yr (Daily) CADTotal Ret Annlzd 15 Yr (Daily) CADInception Date
Fidelity US Monthly Income Ser F1.045Silver3.586.315.265.358.2011/7/2012
Manulife US Balanced Priv Trust F0.945Silver8.087.266.575.397.886/7/2013
Dynamic Global Yield Private Pool F0.904Gold5.957.254.314.746/6/2014
Vanguard Balanced ETF PortfolioVBAL0.244Gold7.146.473.664.791/25/2018
DFA Global 60EQ-40FI Portfolio F0.324Silver6.496.246.494.735.849/7/2011
Dynamic Blue Chip Balanced F1.114Silver5.549.391.715.757.686.811/6/2003
Dynamic Dividend Income Series F1.124Silver1.09-0.414.063.925.155.311/2/2003
iShares Core Balanced ETF PortfolioXBAL0.204Silver7.277.304.155.305.435.546/21/2007
Lincluden Balanced Series F0.394Silver3.962.145.914.6512/18/2017
Mawer Tax Effective Balanced A0.894Silver4.836.361.794.196.897.011/8/1988
RBC Global Balanced Fund D1.334Silver6.096.523.284.736.075.057/3/2007
RBC Select Balanced Portfolio F0.974Silver6.126.393.814.956.705.981/21/2008
RBC Select Choices Balanced Port F1.184Silver6.357.144.404.567/4/2016

Morningstar Direct | Data as of Sept. 12, 2023

The screen resulted in the list of funds in the table accompanying this article. The table includes fund categories, MERs, trailing returns and ratings. It is worthwhile noting that alongside heavyweights such as RBC’s Select series (the largest series of mutual funds in Canada), the screen also showcases “all-in-one” ETFs from the likes of Vanguard’s VBAL-T and iShares’s XBAL-T, which both offer broad global exposure for a noticeably low cost.

This article does not constitute financial advice. It is always recommended to conduct one’s own research before buying or selling any of the investments listed here.

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

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 15/04/24 3:56pm EDT.

SymbolName% changeLast
VBAL-T
Vanguard Balanced ETF Portfolio
-0.79%30.18
XBAL-T
Ishares Core Balanced ETF Portfolio
-0.69%27.49

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