Fund In Focus: Leith Wheeler Income Advantage

This fund offers retail investors access to institutional experience.

Ruth Saldanha 4 October, 2023 | 4:29AM
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Vancouver

This fund is a part of the latest Morningstar Prospects. Read more about Morningstar Prospects here.

Bronze-rated Leith Wheeler Income Advantage Fund Sr F is an asset allocation fund that focuses on paying out income. It derives its income from its investments primarily in fixed income securities, preferred shares, and dividend-paying equities. According to Leith Wheeler, the asset mix includes fixed income securities (which are lower risk), preferred shares, and dividend-paying equities, which provide opportunities for dividends and capital gains. Up to 25% of the assets of the Fund may be invested in foreign securities.

The fund came to the attention of Morningstar analysts Michael Dobson and Danielle LeClair because both its short-term and long-term performance stood out in the Canadian Fixed Income Balanced Category. It made one of its category’s best recoveries after 2020’s trough – the fund’s Series F ranks in the top-five percentile over the trailing three-year period.

So far in 2023, the Leith Wheeler Income Advantage Fund strategy has outperformed both its index, and peers, with returns of 1.64% for the fund, while the index has returned 1.11%, and the category 0.67%. The fund has a management expense ratio of 0.76%.

Growth of $10,000 

Why is Leith Wheeler Income Advantage Worth Considering?

Leith Wheeler Income Advantage, as the name suggests, is a fund for income-seeking investors. The strategy's portfolio comprises four sleeves: Canadian dividend stocks, corporate bonds, multicredit fixed income, and preferred shares. “Multicredit and preferred shares do not appear often in traditional balanced funds, which tend to manage their bond portfolios conservatively. It does provide the fixed-income component with an extra kick but also comes with higher risk,” write LeClair and Dobson.

The two note that Leith Wheeler offers institutional experience to retail investors. “Its historic strength lies with domestic equities and fixed income, but it differentiates this strategy with preferred shares, which are securities with bond and stock-like characteristics that have priority over common stocks in companies' capital structures. The fund’s large preferred stake – 9.1% as of August 2023 holdings – distinguishes it but also makes it more volatile, as a big drop during, and sharp recovery after, 2020's COVID-19 market crash showed,” they say.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Leith Wheeler Income Advantage Sr F10.97 CAD-0.47Rating

About Author

Ruth Saldanha

Ruth Saldanha  is Editorial Manager at Morningstar.ca. Follow her on Twitter @KarishmaRuth.

 
 
 

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