The Dynamic Strategic Yield Fund is a relatively new balanced fund that is managed by Dynamic's team of Oscar Belaiche and Michael McHugh. It invests in a mix of stocks and bonds with the objective of generating a total return that is a mix of yield and long-term capital growth. It pays investors a monthly distribution of $0.0584 a unit, which works out to an annualized yield of about 4.6%.
This truly has a “go anywhere” mandate and can invest in companies of any size, operating in any industry sector, that are located anywhere in the world. Like other funds managed by Mr. Belaiche, it looks for companies that fit into their “quality at a reasonable price” criteria. These types of companies typically generate strong levels of cash flow, have sound balance sheets, and sustainable and growing dividends.
The overall asset mix is based on the managers’ expectations for economic and market conditions. They will position the fund in a way that will allow them to focus on the most attractive investment opportunities.
As of Aug. 31, the fund was invested 59% in equities (31.5% in Canada, 23.5% in the U.S.) with a focus on energy and energy infrastructure, and financials. Top equity holdings included Comcast Corp. Class A (NYSE: CMCSA), Enterprise Products Partners LP (NYSE: EPD), Toronto-Dominion Bank (TSX: TD), and Crescent Point Energy Corp. (TSX CPG).
Michael McHugh is responsible for the bond sleeve of the fund. True to his style, it is conservatively managed and focused on corporate bonds, both Canadian and global. Canadian corporate bonds comprise 10.1% of the portfolio, with 3.6% allocated to foreign bonds and debentures, and 3.3% to high yield bonds. The Dynamic High Yield Bond Fund Series O represents a 3.4% allocation
One big drawback to this fund is that its underlying portfolio is fairly sensitive to interest rates. While the longer-term returns have been quite strong, it struggled in 2013. Year to date, the fund’s performance has been decent, gaining 8.1% to Aug. 31. This lagged the benchmark marginally, but was in the upper half of the category average. The managers have done a great job at keeping volatility contained, with the fund posting 3-year annualized standard deviation of 4.23, below the median for its peer group as seen in the graph.
Over the long term, I expect that the Dynamic Strategic Yield Fund to do well. Over the shorter term however, I believe that returns will be closer to that of its peers, but with below-average volatility.
Fund company: Dynamic Funds
Fund type: Global Neutral Balanced
Fundata FundGrade® Rating: C
Risk level: Low-Medium
Load status: Optional
RRSP/RRIF suitability: Excellent
Manager: Oscar Belaiche since March 2009; Michael McHugh since March 2009
Fund code: DYN1560 (front end)
Minimum investment: $500
See the Fundata Fund Snapshot 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 editor and 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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