Manulife Plots Path Through Volatility

Terry Flanagan

Manulife Asset Management, the $200 billion plus Canadian money manager, is preparing for volatility ahead by amplifying the importance of its income strategies.

Earlier this week, the buy-side arm of Manulife Financial expanded its mutual fund family with seven new offerings in Canadian balanced yield, income generation and corporate bond-oriented strategies. The new funds will aim to attract both institutional and individual investors; three of them will be offered both through trust and corporate classes.

In late 2011 and early 2012, the Canadian asset manager posted the highest year-over-year growth rate at 87.3%.

With demographic changes and increased market volatility, Canadian investors are increasingly focusing on yield and income generation, and the firm “expects the new fund choices to resonate with advisors and investors looking for strategies to achieve sustainable income and to diversify their income stream from traditional income strategies”, according to Jeff Ray, assistant vice-president of Manulife mutual funds and structured products.

The Manulife Strategic Balanced Yield Fund will invest in top Canadian dividend paying equity securities and fixed income securities. The fund will also combine high-yielding U.S. and Canadian assets within both equities and fixed income, to provide an improved risk reward, versus a pure equity fund.

“The very low yielding interest rate environment has made today a stock picker’s market,” said a Canadian buy-side source. “Guaranteed income from strong equity names may be one of the few places that cash can be returned to investors.”

Another new offering, the Manulife Dividend Income Fund, will focus on dividend-paying equities only, which is must-have “downside protection”, according to Ray. The lead manager for this fund will be Jonathan Popper, who is already co-managing the Manulife monthly high income fund, a balance fund that is significantly allocated to dividend paying equities.

Manulife is also expanding existing product lines, such as a corporate bond class to its existing Manulife Corporate Bond Fund. “The lower correlation of corporate bonds to other bond asset classes provides important diversification and may reduce overall risk in a portfolio,” said the fund’s portfolio manager, Terry Carr.

Carr will also lead the fixed income portion of Manulife’s new Canadian Equity Balanced Fund. The fund will mostly be allocated to equities, at nearly 70%, with the remaining 30% in fixed income and money market securities.

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