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Low-volatility non-core bond exposure with A-rated RBC Strategic Income Bond Fund
11/18/2017 6:21:37 PM
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DUE DILIGENCE
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By Dave Paterson  | Wednesday, July 12, 2017


 

 

The RBC Strategic Income Bond Fund just passed its three-year anniversary and has over that time delivered strong results for investors, earning a Fundata A+™ Award for 2016, and current FundGrade™ A-Grade Rating in the process. The fund’s one-ticket bond portfolio consists of a number of bond funds offered by RBC, providing exposure to investment-grade corporate bonds, high yield bonds, emerging market debt, and convertible bonds.

The underlying funds are high quality offerings, with the cornerstone, RBC Global Corporate Bond Fund, having a place on my own Recommended List of Funds. In addition to the bond exposure, the fund also has a 10% weight in emerging market currencies and short-term interest rates.

Sarah Riopelle is responsible for managing the mix of the funds, with input from co-manager Dagmara Fijalkowski and the RBC Global Asset Management Investment Policy Committee. While Ms. Riopelle has some tactical discretion over the fund mix, it is kept within 10% of the fund’s neutral mix. Any tactical shifts are expected to be incremental, as RBC believes that further allowances would create too much risk relative to the overall potential return.

Returns have been strong, outpacing its peers with a 6% average annual compounded rate of return for the three years ending May 31. With a 3-year average standard deviation of 4.2% for a Fundata Volatility ranking of 2/10, the fund’s volatility has been significantly lower than the high-yield index and its peers.

The fund pays a modest distribution of $0.03 per month, which translates into an annualized yield of approximately 3.4%. According to RBC, the yield-to-maturity of the portfolio is just under 3.3%. Costs are about average, with an MER of 1.85%.

The results for this fund have thus far been encouraging. I will continue to watch it closely, and for now, see it as a solid way for investors to access non-core bond exposure in a well-diversified way.

RBC Strategic Income Bond Fund, Series A
Fund company:
RBC Global Asset Management
Fund type:
High Yield Fixed Income
FundGrade™ Rating: A
Fundata A+™ Award: 2016
Style: Fund of Funds
Risk level: Low
Load status: No-load/optional
RRSP/RRIF suitability: Good
Manager: Sarah Riopelle since August 2013
MER: 1.85%
Fund code: RBF482 (no-load)
Minimum investment: $500

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, 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.

 

 
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