CIFSC revises definition for Canadian Income Balanced

The Canadian Investment Funds Standards Committee has approved a revised definition for Canadian Income Balanced funds. It takes effect as of the Sept. 30 data reporting period.

To qualify for this category, funds will be required to make distributions of income and/or realized capital gains on a monthly basis, subject to a minimum frequency of 10 distributions over the past 12-month period.

CIFSC will drop the current requirement that these funds must have a three-year median income distribution to net asset value ratio (INAV) greater than the median INAV for the Canadian balanced category.

When implemented by CIFSC-compliant fund measurement firms next month, the changes will result in the removal of all funds currently in the Canadian Income Balanced category that make only quarterly distributions.

Canadian Income Balanced, the newest CIFSC category, was created this year as of the May 31 reporting period. CIFSC believes that the revisions approved at the CIFSC monthly meeting on Sept. 22 will simplify the definition of the category, and address concerns raised by the industry. A number of fund managers commented that the original definition lacked transparency and inappropriately included funds that made quarterly distributions but that were not being managed as income-oriented balanced funds.

The revised definition for Canadian Income Balanced will be as follows: Based on median values calculated from observations of fund holdings data over a period of three years, a minimum of 70% of the market value of the portfolio must be in a combination of Canadian Equity and Canadian Fixed Income. The equity component must be no less than 30% and no more than 70% of the portfolio. Fixed income and cash together must represent no less than 30% or more than 70% of the portfolio. In addition, monthly distributions of income and/or capital gains must be made for a minimum of 10 of the past 12 months.