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TD, Sentry score A+ Ratings in bond and income fund categories
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A-GRADE FUND REVIEW
The Fundata Analytics Team puts a FundGrade® “A-list” fund under the microscope.



By Fundata Analytics Team  | Monday, January 28, 2013


 
A+ 2012 FUNDS
 
Fundata Canada last Thursday announced the winners of the FundGrade® A+ Rating™ for the top mutual funds of 2012. The FundGrade A+ Rating uses a totally objective, transparent, score-based calculation to rank the annual best of the best mutual funds in Canada. Income and bond funds once again turned in an impressive run in 2012, despite growing concerns that interest rates may be poised to rise. In these categories, two funds in particular posted outstanding performance.

While bond funds did not perform quite as well as they have in the past few years Canadian Fixed Income funds were up 3.4% for the year. The Canadian Dividend Income & Equity category, meanwhile, advanced 7.92% in 2012.

TD Canadian Core Plus Bond Fund

In the Canadian Fixed Income category, the TD Canadian Core Plus Bond Fund has consistently been a top performer. This fund turned in another solid year in 2012, returning 4.9% and earning its second consecutive FundGrade A+ Rating.

Over both the short and long term, this fund has consistently outperformed its peers while limiting volatility. The 2-, 3-, and 5-year average annual compound returns as of Dec. 31, 2012, are 6.3%, 6.3%, and 6.4%, respectively compared to the category average of 5.0%, 5.1%, and 4.9%. The 3-year standard deviation (a measure of a fund’s volatility) of 2.6% is slightly below the Canadian Fixed Income average of 2.8%.

The fund is managed by Geoff Wilson, David McCulla, and Christopher Case and invests primarily in Canadian dollar-denominated investment-grade bonds. Around 70% of the $4.1 billion portfolio is made up of corporate bonds, while federal and provincial bonds make up the bulk of the remaining holdings. To help guard against rising rates, which may not happen in the immediate future but will happen eventually, the duration of the portfolio is kept slightly below the benchmark. Since inception in September 2007, this fund has logged an average annual compound return of 6.5%.

TD Canadian Core Plus Bond Fund is a no-load fund and requires a minimum investment of just $100. The slightly above-average MER of 1.51% is a bargain, considering the track record of the management team, which is considered one of the best in the country.

Sentry Canadian Income Fund

The Sentry Canadian Income Fund is another fund that had an outstanding year in 2012. Residing in the Canadian Dividend & Income Equity category, the fund achieved a FundGrade “A” Grade in every month of the calendar year and has been awarded the A+ designation for 2012.

The fund has been a consistent index beater since its inception in February 2002, and was also awarded the A+ designation in 2011. A $10,000 investment in the fund at inception would have yielded $35,173 at the end of December compared to $24,148 invested in the S&P/TSX Composite Total Return Index over the same period.

Fund managers Michael Simpson and Aubrey Hearn have assigned a risk rating of “Medium” to the fund and suggest that the fund is best suited for investors “planning to hold their investment for the medium to short term.” The 3-year standard deviation of 6.6% compares favorably with the category average of 8.7%.

The managers’ investment strategies include investing primarily in Canadian equities, fixed-income instruments, REITs, and income trusts, and they use a fundamental, bottom-up approach to selecting securities. This strategy has led the fund to first-quartile performance in every calendar year since 2003 (with the exception of 2006) as well as in 1-, 3-, 5-, and 10-year compound returns.

At the end of December 2012, the fund’s $2.6 billion portfolio consisted of over 80% equity and just over 15% cash. Completely invested in North American securities, the fund had 77% exposure to Canada and 23% to the U.S., with a diverse sector breakdown of close to 20% in energy, 17% in industrials, and 9% in information technology.

The fund is sold with options for front-end, low-load, or deferred sales charge. Its MER is 2.7%, and initial minimum investment is $500.

Reid Baker is Manager, Analytics & Data at Fundata Canada Inc., a leading source for investment fund information. He is Chairman of the Canadian Investment Funds Standards Committee (CIFSC).

Brian Bridger, CFA, FRM, is Director, Analytics & Data at Fundata Canada Inc. and is a member of the Canadian Investment Funds Standards Committee.

Notes and Disclaimers

© 2013 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 mutual 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. The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. However, please call the author to discuss your particular circumstances.

 
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