"This is a growth fund, but it's not aggressive."

In the bond fund category he likes the Trimark Advantage Bond Fund because its manager, Patrick Farmer, has almost three-quarters of the fund invested in corporate bonds, which is where the gains will come this year, Mr. Barlow says.

"Last year corporate bond prices were beaten down by nervous investors and now high-quality corporate bonds are depressed, relative to government debt issues, to an almost unprecedented degree. We look for corporate bonds to outperform government bonds this year."
Peter Brewster
Newsletter editor
Canadian Mutual Fund Adviser

Mr. Brewster's choice is the Clarington Canadian Balanced Fund. Under manager Peter Marshall of Halifax-based Seamark Asset Management Inc., the fund has been a first- and second-quartile performer over the past five years. "There are a few balanced funds with better performance numbers, but they are not as steady and consistent as this one," Mr. Brewster says.

He moves away from the traditional bond fund categories to choose an exchange-traded fund (ETF), known as the iUnits iG5 fund, managed by Barclays Global Investors Canada Ltd. and listed on the Toronto Stock Exchange (XGV-TSE).

This straightforward fund only holds Government of Canada five-year bonds, and its management expense ratio is a minuscule 0.25 per cent.

"Now that rates are so low, a low MER is crucial and a government bond fund provides peace of mind," Mr. Brewster says.
Raynor Burke
Mutual fund analyst
National Bank Financial

Mr. Burke chooses the AIC American Balanced Fund, which he likes because "it does what a good balanced fund should do; it focuses on blue chips, high-quality bonds and the preservation of capital." This approach, taken by managers Michael Lee Chin and Neil Murdoch, means the fund does well in bear markets and is also a good counterbalance for more aggressive funds, he says.

In the bond category, Mr. Burke opts for the GGOF Guardian Canadian High Yield Fund. Managed by Stephen Kearns, it holds about 65 per cent "investment grade" or higher-quality corporate bonds and 30 per cent lower rated issues. "You're talking higher-risk bonds here, but also higher potential return, because as the economy strengthens, their risk will decrease and the lower-rated issues will outperform the blue chips," he says.
Ian Filderman
Mutual fund analyst
Scotia Capital

Like Mr. Barlow, Mr. Filderman chooses the Fidelity Canadian Asset Allocation Fund rather than a conventional balanced fund. "The two big strengths here are the stock picking ability of Alan Radlo and the asset mix decisions made by Dick Haberman," he says.

He also votes for the Trimark Advantage Bond Fund, which has a unique blend -- about two-thirds in corporate high-yield bonds and the rest in government bonds and mortgage-backed securities, which gives the fund a conservative anchor, he says. "Pat Farmer and Rex Chong do a huge amount of credit research and as we move out of a recession, higher-yield corporate bonds should outperform, on a relative basis."
Dan Hallett
Mutual fund analyst
Sterling Mutual Funds

Mr. Hallett's pick is the McLean Budden Balanced Growth Fund. "Their disciplined team approach to investing has resulted in first- and second-quartile performance for many years and the management expense ratio is only 1 per cent, compared with about 2.3 per cent for the average balanced fund," he says. There's a minimum $10,000 investment needed, he adds.

Mr. Hallett recommends the Phillips Hager & North Bond Fund because its top-flight management team has made it a constant top-quartile performer, while it has the lowest fees in its category, he says. "The scenario for bonds is uncertain, because if interest rates move back up again their prices will fall, but if that happens this team is astute enough to manoeuvre the portfolio to achieve the best results."
Stephen Kangas
Analyst
Fundlibrary.com

Among balanced funds, Mr. Kangas likes the Trimark Income Growth Fund with the upfront sales charge. The equity side, run by value manager Keith Graham, is diversified and conservative; while the bond portfolio is run by veteran fixed-income manager Patrick Farmer, he says. "The 1.6-per-cent management expense ratio is one of the lowest in the category, which is another plus."

In the bond fund group, his favourite is the TD Canadian Bond Fund with the 10-year record, which has a rock-bottom management expense ratio of 1 per cent. "Unlike many bond funds, it has a good mix of corporate as well as government bonds and it's been a first-quartile performer since 1995," Mr. Kangas says. The corporate bonds make it a little more volatile, but when rates are as low as they are now, it's necessary to be a little aggressive to get a decent return for investors, he says.
Peter Loach
Mutual fund analyst
BMO Nesbitt Burns

Like Mr. Brewster, Mr. Loach favours the Clarington Canadian Balanced Fund, run by Seamark Asset Management Inc. "This is a conservative investment category and Peter Marshall and his team run it in a conservative way. They produce solid returns with very little risk on the equity side and virtually no risk on the income side," he says.

Rather than a traditional bond fund, Mr. Loach likes the CI Signature High Income Fund, which is part of the Canadian income trust funds category. "The manager, Ben Cheng, is producing exceptional results with a mix of corporate bonds, royalty trusts, income trusts and REITs," he says. Mr. Loach adds that this fund is, of course, riskier than a conventional bond fund.
Gordon Pape
Co-author
2002 Buyers' Guide to Mutual Funds

Mr. Pape also likes the Clarington Canadian Balanced Fund because of the excellent management job done by Peter Marshall and the team at Seamark Asset Management Inc. "This is a true balanced fund, with roughly 60 per cent in bonds and 40 per cent in stocks. It's ranked in the first or second quartile for the last four years and has never lost money in any calendar year since 1995," he says.

For his bond fund choice, Mr. Pape votes for the Phillips Hager & North Short Term Bond and Mortgage Fund, with a caveat. "Don't look for big returns from bond funds in 2001.

"We will likely see an economic recovery and rising rates this year, which will hurt the bond market, so it's best to stay in a good short-term fund to minimize risk. This one has tremendous consistency and it's been a first-quartile performer for years."
Funds the experts like
As of Jan. 31, 2002

BALANCED                         $million  1-yr    3-yr   5-yr   10-yr2 Fidelity Cdn Asset Alloc. A    $6,414    -3.1%    5.1%  9.0%   --


3 Clarington Canadian Balanced      273     1.4%    8.5%  9.2%   10.4%


1 McLean Budden Bal. Growth         151    -1.1%    7.7%  8.9%   --


1 AIC American Balanced              29     5.3%    6.2%  --     --


1 Trimark Income Growth - SC      1,248    13.2%   13.3%  8.1%   10.9%

BOND

2 Trimark Advantage Bond            709     6.2%    4.5%  5.9%   --


1 iUnits GOC 5 Year Bond             84     6.9%   --     --     --


1 PH & N Bond                     1,553     6.9%    5.5%  6.9%    8.8%


1 CI Signature High Income          384    11.2%   13.1%  9.8%   --


1 PH & N Short Term Bond & Mtg      228     7.5%    6.0%  5.8%

1 GGOF Guardian Cdn High

Yield Mutual                         18    9.5%    8.0%  --     --


1 TD Canadian Bond Fund           2,531     6.1%    5.5%  7.4%    8.9%

Highlighted numbers represent the number of times a fund was chosen by the experts