TD Asset Management has long had one of the most respected fixed-income
teams on the street and has consistently delivered returns that are in line
with the FTSE/TMX Canadian Bond Universe, with comparable levels of
volatility. A good example is the
TD Canadian Core Plus Bond Fund, which is very similar to the highly-regarded
TD Canadian Bond Fund. The main difference is that the Core Plus offering allows the managers
the ability to invest up to 30% of the fund in “non-core” investments such
as high-yield bond and investment-grade global bonds. Let’s have a look at
how this strategy has worked.
At the end of March, the fund was nearly fully invested, with 95% allocated
to bonds, 3% to floating rate notes, and just over 1% to cash.
Of this, 88% was in Canadian bonds, while 12% was invested in U.S. bonds.
About two thirds of the fund was investment-grade corporate bonds, with
around 11% in high-yield and non-investment grade issues. As a result, the
fund offers a yield to maturity that is higher than the benchmark, and a
duration that was modestly lower.
I continue to view this as one of the best Canadian bond funds around. It
has a solid management team, led by
Christopher Case. They follow a disciplined, repeatable process, at a reasonable cost. The
fund tends to deliver most of the upside of the market, while participating
in less of the downside. Looking at the current environment, it is unlikely
we will see any meaningful upward pressure on interest rates in Canada,
making this a strong pick for now.
TD Canadian Core Plus Bond Fund
TD Asset Management
Canadian Fixed Income
Rob Pemberton since Nov. 2013; Christopher Case since Sept. 2011
TDB695 (front end units)
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
Dave Paterson’s Top Funds Report,
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.
Notes and Disclaimer
© 2017 by Fund Library. All rights reserved. Reproduction in whole or in
part by any means without prior written permission is prohibited.
Commissions, trailing commissions, management fees and expenses all may be
associated with fund investments. Please read the simplified prospectus
before investing. Mutual funds are not guaranteed and are not covered by
the Canada Deposit Insurance Corporation or by any other government deposit
insurer. There can be no assurances that the fund will be able to maintain
its net asset value per security at a constant amount or that the full
amount of your investment in the fund will be returned to you. Fund values
change frequently and past performance may not be repeated. No guarantee of
performance is made or implied. This article is for information purposes
only and is not intended as personalized investment advice.