Last time I looked at how the big banks’ mutual fund offerings stack up against not only each other but also compared with some of the larger non-bank fund factories. This time, I thought it would be interesting to highlight some of my top bank fund picks in a few of the main categories.
TD Canadian Bond Fund (TDB 162). This has been one of my favorite bond funds since I started analyzing mutual funds more than a decade ago. It is run by a great team and is very focused on corporate bonds. It has a yield higher than the benchmark and a duration that is lower. This positioning will help it to outperform while interest rates remain stable, and to provide better downside protection when they begin to move higher.
Some may be wondering how the PH&N Bond Fund and PH&N Total Return Bond Fund would rank if they were considered. The simple answer is that it depends on what series you are buying. If you are buying the Series D units directly from PH&N, then they would rate as our top picks. However, if you must buy the higher-cost units through an RBC branch or an advisor, then the MER erodes any excess return, leaving the TD offerings as our top picks.
RBC Monthly Income Fund (RBF 448). This conservatively-managed balanced fund has a proven track record of delivering above-average returns with lower-than-average risk. It has a target asset mix of 55% bonds, 40% equity, and 5% cash. It pays a monthly distribution of $0.0425 per unit, which works out to an annualized yield of around 3.8%. The biggest drawback to this fund is it is not available in registered plans.
TD Monthly Income Fund (TDB 622). With just under 37% invested in fixed income, this balanced fund is more aggressively positioned than the RBC offering. As a result, volatility has also been higher. To date, investors have been rewarded for taking on this additional risk, with better long-term returns. Further, with the higher equity weighting, I expect this fund to outperform as rates begin to rise.
RBC Canadian Equity Income Fund (RBF 591). This actively-managed Canadian dividend and equity income fund has consistently delivered above-average returns with an MER that is in the lower half of the category average. While I don’t expect it to deliver the same level of absolute returns that it has, I believe that it can deliver above-average risk-adjusted returns for investors.
RBC North American Value Fund (RBF 554). There are many reasons to like this Canadian-focused equity fund, including a strong management team, a solid investment process, and a reasonable MER. The fund is also at a size that the managers should not encounter any difficulty implementing their process. All things considered, this is a great core fund for most investors.
TD U.S. Blue Chip Equity Fund (TDB 977). As the name suggests, this fund invests in some of the best and biggest companies in the U.S., such as Google Inc. (NASDAQ: GOOG), Amazon.com Inc. (NASDAQ: AMZN), and Apple Inc. (NASDAQ: AAPL). An interesting bent to this fund is that unlike other blue-chip funds that tend to be more value focused in approach, this one is more growth-oriented. As a result, it tends to be a bit more volatile than the S&P 500 Composite Index. Its biggest drawback is the 2.55% MER. But for those looking for actively-managed U.S. equity exposure, this is a fund that is worthy of consideration.
TD U.S. Equity Portfolio (TDB 962). This fund of funds holds a number of U.S. equity funds that are managed by TD. It provides exposure to both growth and value styles. While the focus is on large caps, there is some exposure to small- and mid-caps, which currently make up about 15% of the fund. Volatility has been in line with the benchmark index, and performance has consistently been in the upper half of the U.S. equity category. Again, cost is the main drawback, with an MER of 2.59%.
Scotia Global Growth (BNS 374). The only Scotia offering on my list invests in a diversified portfolio of companies located around the world. The focus is on big companies, but it does have some exposure to mid-size companies as well. It is more growth-focused in approach, meaning that it may be more volatile at times. Performance has been in the upper half of the global equity category for the past five years. The MER is a bit high at 2.57%.
TD Global Dividend Fund (TDB 231). With its emphasis on dividends, this global equity fund has more of a value tilt than the Scotia offering. It looks for well-managed companies anywhere in the world that pay a dividend. Not surprisingly, it is heavily weighted towards the more defensive sectors, such as consumer defensive and healthcare. Performance, particularly the shorter-term numbers, have been strong on both an absolute and relative basis. It’s not a cheap fund, with an MER of 2.57%.
Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due diligence on a variety of investment products. He is also the publisher of Dave Paterson's Top Funds Report and Mutual Fund and ETF Update offering regular commentary and in-depth analysis of Canada’s top investment funds. He uses a unique analytical approach to identify funds with strong, risk-adjusted returns, and regularly publishes his insights and analyses in Fund Library.
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