Top-rated mutual funds with top-rated investment processes.
The screen
When investors look at the performance of mutual funds, they are likely looking for something simple – are those performance numbers positive or negative? Considering why those numbers are positive or negative is also important. Why a fund performs a certain way can be the direct result of its investment philosophy and process. An understanding of these components can help investors better gauge if performance results are expected given the goal and method applied. This can be particularly helpful during periods of volatility, such as the one we have experienced since the collapse of Silicon Valley Bank earlier this month. A strong investment process is well-defined and consistently executed, and generally able to withstand short-term market shocks and reward investors over the long term.
A fund’s investment process can be nuanced. To help guide investors, Morningstar’s manager research team assigns ratings to Canadian funds and ETFs that include an explicit component focused on understanding their investment philosophy and process. We refer to this component as the “Process” pillar and rate each asset manager as either Low, Below Average, Average, Above Average or High, depending on the efficacy of their practices. To highlight a few great mutual funds available to Canadians with top-rated investment processes, I used Morningstar Direct to screen more than 3,400 Canadian-domiciled mutual funds and ETFs to find a selection of options to consider. The criteria include:
A Morningstar Quantitative or Analyst Process Pillar rating of High, indicating the fund has a clearly defined investment process and performance objective that is repeatable and implemented effectively.
A Morningstar star rating of five stars. The star rating is an objective look back at a fund’s after-fee, risk-adjusted returns relative to the category to which the fund belongs. Though the measure is backward-looking, Morningstar’s research shows that over time and on aggregate, five-star funds continue to outperform four-star funds, three-star funds, etc., after receiving the rating.
A top quintile category rank month-to-date indicating the funds selected have outperformed their peers since March 1, 2023.
*Data as of March 23, 2023
What we found
Mutual Funds with Clearly Defined Investment Processes
Name
Morningstar Category
Annual Report Management Expense Ratio (MER)
Morningstar Quantitative Rating
Morningstar Analyst Rating
Total Ret MTD (Daily) CAD
Total Ret % Rank Cat MTD (Daily)
Total Ret 1 Yr (Daily) CAD
Total Ret % Rank Cat 1 Yr (Daily)
Total Ret Annlzd 3 Yr (Daily) CAD
Total Ret % Rank Cat 3 Yr (Daily)
Total Ret Annlzd 5 Yr (Daily) CAD
Total Ret % Rank Cat 5 Yr (Daily)
Dynamic Active Canadian Dividend ETF
Canada Fund Canadian Dividend & Income Equity
0.84
Gold
-3.20
20
-4.28
11
23.26
44
10.88
2
Fidelity True North Sr F
Canada Fund Canadian Equity
1.08
Silver
-2.29
13
-4.55
17
21.84
67
9.89
2
Fidelity Greater Canada Sr F
Canada Fund Canadian Focused Equity
1.11
Silver
-0.19
14
1.93
5
33.26
1
19.20
1
PH&N Inflation-Linked Bond Fund F
Canada Fund Canadian Inflation-Protected Fixed Inc
0.37
Gold
2.28
1
-5.20
48
0.74
10
1.36
1
RBC Canadian Mid-Cap Equity I
Canada Fund Canadian Small/Mid Cap Equity
0.71
Gold
-3.00
18
-9.41
34
31.67
16
10.65
7
Fidelity Floating Rate Hi Inc F
Canada Fund Floating Rate Loans
0.90
Silver
-0.26
11
11.26
1
8.63
26
4.08
6
Manulife Global Equity Class F
Canada Fund Global Equity
1.08
Gold
1.48
16
3.09
12
16.28
40
9.58
6
Dynamic U.S. Balanced Class Ser F
Canada Fund Global Equity Balanced
1.08
Silver
3.87
1
-3.74
65
12.47
39
10.15
1
Dynamic Blue Chip Balanced F
Canada Fund Global Neutral Balanced
1.11
Silver
1.60
3
-1.73
28
9.39
38
6.41
5
Manulife US Balanced Val Priv Trust F
Canada Fund Global Neutral Balanced
0.91
Silver
1.34
6
-3.02
58
14.87
3
8.11
1
Manulife US Monthly High Inc F
Canada Fund Global Neutral Balanced
1.13
Bronze
1.33
7
-3.24
64
14.62
4
7.91
1
Fidelity NorthStar Sr F
Canada Fund Global Small/Mid Cap Equity
1.13
Silver
0.36
9
3.55
7
18.40
28
6.26
9
Dynamic Global Real Estate Series F
Canada Fund Real Estate Equity
1.22
Gold
-7.12
16
-15.14
12
12.92
30
5.27
8
RBC Life Science & Technology Fund F
Canada Fund US Equity
0.94
Gold
6.31
1
-0.51
21
18.91
49
14.53
3
Canoe Defensive U.S. Equity Port Cl F
Canada Fund US Equity
1.25
Silver
1.09
18
7.22
2
17.25
66
11.70
12
Fidelity US Focused Stock F
Canada Fund US Equity
1.10
Silver
0.86
20
-8.19
78
16.35
75
12.03
9
RBC U.S. Mid-Cap Growth Equity Fund F
Canada Fund US Small/Mid Cap Equity
0.93
Gold
-1.73
1
-2.10
22
19.26
59
10.78
1
Dynamic Active U.S. Mid-Cap ETF
Canada Fund US Small/Mid Cap Equity
0.78
Gold
-5.70
17
2.33
4
17.79
66
7.55
24
Morningstar
The list above highlights funds from 13 different mutual fund categories (as defined by the Canadian Investment Fund Standards Committee) from six different asset managers, indicating strong processes are not confined to a specific asset class or investment style. Although not explicitly screened for, each of these funds also earned a Bronze, Silver or Gold Morningstar Analyst or Quantitative Rating indicating a forward-looking view of the fund’s ability to outperform its peer group and/or relevant benchmark on a risk-adjusted basis over a full market cycle. Every fund on the list has delivered, with all but two ranking in the top decile of their respective categories over the past five years.
Note that the management expense ratios listed here are reflective of the f-share class. In the table, f-class (also known as fee-based share classes) shares exclude the cost of advice and are held in fee-based accounts where the adviser charges separately for advice.
This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.
Danielle LeClair, MFin, is director of manager research, Canada for Morningstar Research Inc.
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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
