Mutual funds that invest in Canadian bonds are a core element of most portfolios. Morningstar Manager Research can help investors identify strategies that are most likely to outperform over the long term.
To screen for the top-performing funds in this category, we looked for those with the best returns over the past one-, three-, and five-year periods. Five Canadian fixed-income funds made it through the screen.
- Dynamic Active Core Bond Private Pool
- Fidelity Systematic Canadian Bond Index ETF FCCB
- Manulife Smart Core Bond ETF BSKT
- Phillips, Hager & North Total Return Bond
- Pimco Canadian Core Bond
Canadian Fixed-Income Fund Performance
Over the past 12 months, the average fund in the Canadian fixed-income Morningstar Category declined 0.66%. On an annualized basis, Canadian fixed-income funds have climbed 4.49% over the past three years and have been flat over the past five years. Meanwhile, the Morningstar Canada Core Bond Index has declined 0.88% over the past 12 months, gained 4.35% per year over the past three years, and lost 0.02% per year over the past five.
What Are Canadian Fixed-Income Funds?
Funds in the Canadian fixed-income category must invest at least 90% of their fixed-income holdings in Canadian dollars with an average duration greater than 3.5 years and less than 9.0 years, according to the Canadian Investment Funds Standards Committee. In addition, these funds must invest primarily in investment-grade fixed-income securities, such that the average credit quality of the portfolio as a whole is investment grade (a BBB or equivalent rating or higher) and not more than 40% of the portfolio’s holdings are invested in high-yield fixed-income securities.
Screening for the Top-Performing Canadian Fixed-Income Funds
To find the best Canadian fixed-income funds, we looked at return data from the past one, three, and five years, using data available in Morningstar Direct. We screened for Canada-domiciled open-end and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We also filtered for funds with Morningstar Medalist Ratings of Bronze, Silver, or Gold. We excluded funds with assets under C$100 million. This left five investments.
Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. Medalist Ratings may differ among the share classes of a fund.
Dynamic Active Core Bond Private Pool
- Share Class: Dynamic Active Core Bond Private Pool F
- : BronzeMorningstar Medalist Rating
- : ★★★★Morningstar Rating
The C$3.1 billion fund lost 0.58% over the past 12 months, while the average fund in its category was down 0.66%. The Dynamic fund, which launched in June 2014, has climbed 4.76% over the past three years and gained 0.33% over the past five years.
Fidelity Systematic Canadian Bond Index ETF
- Ticker: FCCB
- : SilverMorningstar Medalist Rating
- : ★★★★Morningstar Rating
The C$4.6 billion fund lost 0.29% over the past 12 months, while the average fund in its category was down 0.66%. The Fidelity International fund, which launched in September 2019, has climbed 5.03% over the past three years and gained 0.42% over the past five years.
Manulife Smart Core Bond ETF
- Ticker: BSKT
- : BronzeMorningstar Medalist Rating
- : ★★★★Morningstar Rating
The C$762.8 million fund lost 0.43% over the past 12 months, while the average fund in its category was down 0.66%. The Manulife fund, which launched in November 2020, has climbed 4.96% over the past three years and gained 0.57% over the past five years.
Phillips, Hager & North Total Return Bond
- Share Class: PH&N Total Return Bond Fund F
- : SilverMorningstar Medalist Rating
- : ★★★★Morningstar Rating
The C$12.7 billion fund dropped 0.42% over the past 12 months, falling less than the average fund in its category, which fell 0.66%. The RBC fund, which launched in June 2007, has climbed 4.68% over the past three years and gained 0.20% over the past five years.
Pimco Canadian Core Bond
- Share Class: Pimco Canadian Core Bond F
- : GoldMorningstar Medalist Rating
- : ★★★★★Morningstar Rating
The C$1.4 billion fund dropped 0.23% over the past 12 months, falling less than the average fund in its category, which fell 0.66%. The Pimco fund, which launched in January 2011, has climbed 5.31% over the past three years and gained 0.38% over the past five years.
