Finally, a fund after my own heart – entertainment and communications! The TD Entertainment & Communications Fund invests in companies that are involved in the entertainment, media, and communications industries, such as Amazon.com Inc. (NASDAQ: AMZN), Google Inc. (NASDAQ: GOOG), and Facebook Inc. (NASDAQ: FB). Given the pace at which our communication technologies continue to evolve, there is significant growth opportunity if you have the stomach to withstand the potential of another tech bubble.
This fund has a fairly concentrated portfolio where the top 10 names make up slightly more than half of the fund. Not surprisingly, it is heavily weighted towards technology, which makes up nearly 60% of holdings. Consumer services is the next-largest sector, making up nearly 35% of the fund. It has a go-anywhere mandate, but most of the focus has historically been in the U.S.
Looking for long-term trends
As part of the management process, managers Daniel Martino and Paul D. Green II of T. Rowe Price look for multi-year, secular trends that will evolve over the broader technology landscape. Because of this longer-term focus, portfolio turnover of late has been fairly modest, averaging in the 40% range. The mangers will use periods of higher volatility to improve the portfolio, as evidenced by the higher turnover in 2008 and 2009.
Box office-topping performance
TD Entertainment & Communications Fund has been a very strong performer, finishing in the first quartile every year except for 2008 and 2002 when it finished near the bottom. The fund posted a 1-year return of 29.67% for the year ending May 31, 2013; a 3-year average annual compound return of 18.04%; 22.04% for 5 years; and 10.80% for 10 years.
Its consistent outperformance over its category average helped earn it the Fundata FundGrade A+ Rating in 2013, the third consecutive year that this fund has made it to that small and very exclusive list. The fund is slightly more volatile than the category average, which is not surprising given the narrowness of its mandate. If you are considering investing in this fund, you'd better be ready for a potentially bumpy ride.
The fund is classified as a Global Equity fund because the Science & Technology Equity category has been discontinued. Despite the strong performance and modest historic volatility, this is not a fund that I would consider to be a core holding. Given that it invests only in a few sectors, the potential for extreme volatility is fairly high. Instead, I believe that this fund should be treated much like a sector fund, suitable only for those who can accept its higher risk profile. Exposure within a portfolio should also be limited.
Fund company: TD Asset Management Inc.
Fund type: Global Equity
Fundata FundGrade: B; FundGrade A+ Rating 2013
Risk level: High
Load status: No load/optional
Manager: T. Rowe Price: Daniel Martino since January 2010; Paul D. Green II since June 2013
Code: TDB 652 (no-load); TDB 324 (front end load)
Minimum investment: $500
See the Fundata FundCard™ for more details.
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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