Looking for a Strong 60/40 Balanced Fund?

Capital Group manages a great one for Canadian investors.

Michael Dobson 5 May, 2023 | 4:42AM
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Canadians looking for a proven active stock and bond allocation strategy from a distinguished organization should consider Capital Group Global Balanced Canada F. The balanced fund has a Silver Morningstar Analyst Rating and its parent firm won Morningstar’s 2023 exemplary stewardship award. The strategy plays defence well and has maintained its position as one of the better-performing strategies in its category during the last few years’ fast-paced markets.

Rolling Up its Sleeves

Like most Capital Group strategies, multiple, independent managers run the sleeves of Global Balanced Canada. Six managers pick securities on their own in different styles in separate portfolio slices. The sleeves roll up to a diversified, resilient portfolio. Portfolio manager Hilda Applbaum shifts assets among the team and monitors the performance of each sleeve.

A possible downside of independent decision-makers is that they make offsetting moves – one adds equity while another one sells – which can result in an ineffective portfolio, but the execution in this fund has been more complementary than contradictory.  In 2022, for example, the aggregate portfolio quickly raised cash early in the year but started putting the money back to work before 2023’s start.

Defense First

Global Balanced Canada aims to keep up in bull markets while losing less in bear markets. While the managers invest in their own way, they typically target large-quality stocks with the help of an extensive global analyst group. The bond sleeve primarily invests in investment-grade bonds that serve as a ballast to the more volatile equity sleeves.

The strategy holds far fewer Canadian securities than peers, but it aligns with the team’s strengths. That’s due to Capital Group’s expertise in investing in Europe, Asia, and the US. Global Balanced Canada held 9% of its equity in Canada, less than a third of the Global Neutral Balanced Morningstar category where Canadian stocks represented 28% as of March 31, 2023. Currency movements, however, can still influence the largely unhedged fund’s relative performance versus its category.

So Far, So Good

The 6.3% annualized after-fee gain of the fund’s F4 share class since its Aug. 31, 2015 inception through March 31, 2023, ranks in the top decile of the Canada Fund Global Neutral Balanced Morningstar category. It also beat the Morningstar Canada Neutral Global Target Allocation Index by 1.2 percentage points over that time. Even in the past five tricky years for equity markets, the fund still ranked in the category’s top quartile.

The fund’s risk-adjusted results are even more impressive. It has delivered 1.8% of annualized alpha or returns above what you would expect from this equity-heavy portfolio, versus the Morningstar Canada Neutral Global Target Allocation Index. Its more than 100% up-capture ratio and 86% down-capture ratio show the fund met its goal of keeping pace with rising markets and protecting capital in falling ones.

Conclusion

Silver-rated Capital Group Balanced Canada’s strong team, solid parent, and ability to consistently fulfill its stated objectives make it one of the best 60/40 portfolios for Canadian investors. They’re poised to continue navigating well through volatile markets.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Capital Group Global Balanced Canada F15.48 CAD-0.23Rating

About Author

Michael Dobson  Michael Dobson is an Associate Manager Research Analyst at Morningstar Canada

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