If historical performance is a good yardstick, the subdued, low-key style of the managers of McLean Budden Ltd.’s $206-million McLean Budden Balanced Growth Fund works just fine.

For the 15 years ended Nov. 30, 2007, the fund has posted a solid average annual compound return of 9.2%, vs the median of 7.2%. Rated five-star by Morningstar Canada, the fund picked up the award for best global balanced fund at the 2007 Canadian Investment Awards in November.

Consistent with its approach, the firm probably won’t be firing off any flares to advertise its success.

“In 60 years, nothing really has changed in how we do things,” says Miranda Hubbs, executive vice president and portfolio manager at the Toronto-based firm. Funds are managed by a team of experts — unlike funds at other companies that often feature star managers. The team approach, says Hubbs, produces a “much lower risk strategy in the long run.”

The fund features a mix of fixed-income securities, Canadian and global equities and cash. In early January, the asset mix was 35% fixed-income, 28% Canadian equities, 30% global equities and 7% cash. Global equities are split about evenly between U.S. and international names.

The McLean Budden managers consider stocks in 10 global industry sectors and assign minimum and maximum weightings to those sectors. They also work to ensure there is appropriate geographical diversification.

The fund typically holds 110-140 stocks. It aims for companies with large capitalizations, strong balance sheets and good management. As a growth style investor, says Hubbs, the best way to identify above-average earnings potential through a cycle is to identify long-term growth trends.

The diversification strategy should stand the fund in good stead, given recent market turbulence and fear that the U.S. is tumbling into a recession.

“It has certainly been a rocky start to the year,” says Hubbs. “It will definitely be interesting. We are now in the midst of major writedowns and capital issues. It’s a unique period, in which you have the U.S., Britain and Europe trying to maintain standards of living, and then you have China and India trying to build their countries.”

Couple those factors with Russia and the Middle East’s enormous wealth in oil. This increased wealth leads to more purchasing of things such as automobiles, travel and airplanes, says Hubbs, further fuelling global growth.

Concern over the fallout from the subprime debacle has led managers of the fund, which does not use currency hedging strategies, to de-emphasize global financial companies.

The team is not keen to add to this sector as it believes U.S. lending delinquencies will ramp up for some time. As well, the credit crisis will probably dampen consumer spending, which hits consumer discretionary stocks.

On the flip side, says Hubbs, the fund is positive about consumer staples, in which greater earnings predictability should be rewarded. The other key positions are in industrials and technology. The U.S. holdings in these specific sectors tend to have a high degree of foreign sales and are leveraged for stronger global economic growth outside of the country, according to Hubbs. The fund has also boosted its cash position over the past year to 7% from 5%, to position itself for opportunities and a volatile market.

On the industrial side, Honeywell International Inc. has found favour with managers. Hubbs says it has great exposure to global opportunities and depth of technologies. In particular, Honeywell’s automotive division, focused on turbo technology, should gain traction with the drive to increase fuel efficiency. Managers also expect good things from Montreal-based Bombardier Inc. The consensus is positive on the regional business jet market and growth prospects. .

Managers also like MEMC Electronic Materials Inc., a U.S, company that makes silicon wafers. It’s an underlying energy play, says Hubbs, because the polysilicon product is a building block for solar panels, increasingly important as a green energy source.

Managers also enhance overall asset diversification by holding units of several McLean Budden mutual funds, including McLean Budden Global Equity Fund Class A, International Equity Class A and American Equity Class A.

The internal research process begins with a universe of 750 stocks, which is whittled down to 300 or so names. In-house ideas, external research and hands-on meetings and conferences all play a role in targeting companies.

@page_break@Investment decisions are made on the basis of weekly meetings of the portfolio teams. Also, 18 sector-specific analysts add to the input and decision-making.

If the value of a stock varies — say, more than 25 basis points from its target weighting — it will be addressed. The team can let the stock run up, bring it back to its target weighting, decide that it’s fully valued and sell down, or take some profits off the table. Rebalancing decisions naturally fall out in the process.

No small point is the 0.95% management expense ratio, compared with the median fund MER of 2.37%. The fees have been steadily inching downward from 1.75% in 1997 to the current rate in 2004. When it comes to outperforming peers over the long term, Hubbs considers the lower fees a distinct advantage.

The firm’s approach, according to Hubbs, is simple: low fees, long-term discipline, high-quality companies. “You see all the different flavours of the month coming out across the industry,” she says, “but it really is just long-term, fundamental investing.” IE