By Olev Edur
National Post, January 13, 2007
Primerica Financial Services Ltd. of Mississauga continues to field top-flight Canadian balanced funds with its Common Sense Asset Builder series. In terms of performance over the three-year period through December, 2006, they took four of the top 10 spots. Six months ago, they ranked in the top five over one-, three-, five- and ten-year time frames (although in fairness, the portfolios are similar for each).
In addition to consistent out performance, these segregated funds come with a reassuring but obviously unnecessary 75%-of-capital guarantee at maturity; the fixed-income component of the portfolio consists primarily of sufficient Government of Canada strip bonds to cover the guarantee.
"The maturity dates for these funds vary, so the fixed income or 'cash' component can vary too," says Martin Hubbes, executive vice-president and chief investment officer at AGF Funds Inc. in Toronto, co-manager of the Common Sense funds along with Tristan Sones.
The equity component is primarily Canadian but also includes foreign securities (current foreign content is on the rise at 19%). "Some sectors, such as technology, health care, and consumer products, don't have adequate representation in Canada," says Mr. Hubbes, adding that the United States and Europe are the primary markets for foreign holdings.
The portfolios of the Common Sense Asset Builder series also may include some income trust exposure, although at present it is nil. "We found the valuations were high," Mr. Hubbes says. "Also, our management style is GARP [growth at a reasonable price], and many of these companies don't have long-term growth prospects -- that's why they became income trusts. "That doesn't mean we won't buy them, but only if we find the right vehicles."As for what's coming down the pike in 2007, Mr. Hubbes is optimistic. "We don't do any market timing, but we do see interest rates stabilizing as the U.S. comes in for a soft landing," he says. "The Fed [U.S. Federal Reserve] will probably ease its monetary policy and then the markets will accelerate again. We may get a mid-cycle slowdown, but it should pick up again by the end of the year."