Fund in Focus: TD Global Entertainment & Communications Fund

FundGrade A+® Award winner

If you look at some of the biggest names driving stock market returns over the past few years, a common theme has emerged. Most are involved in the technology sector, with a focus on entertainment and communications. Companies like Facebook, Amazon, Netflix, and Google parent Alphabet (commonly referred to as the FANG stocks) have been key contributors to the outsized gains of U.S. stock markets.

Managed by Baltimore based T. Rowe Price, TD Global Entertainment & Communications Fund invests in companies involved in media and communications. The managers use a bottom-up approach to find companies they believe have the potential to deliver durable long-term growth. They look for two types of growth companies: larger, more established companies with more stable, predictable growth characteristics; and higher-growth companies that are benefitting from a thematic tailwind.

Despite having nearly 60 individual positions, the portfolio is concentrated. The top 10 names make up nearly 60% of the fund. Not surprisingly the top holdings are well-known mega-cap names Amazon.com Inc., Alibaba Group Holding Ltd., Facebook Inc., Netflix Inc., and Alphabet Inc.. It is also concentrated in a handful of market sectors, including communication services, consumer cyclical, technology, and real estate. The real estate holdings are cell tower companies such as American Tower and Crown Castle International

The manager takes a patient approach, demonstrated by the low portfolio turnover. In 2019, turnover was 8% and has averaged just 12% over the past five years.

Performance has been excellent, posting top-quartile returns over all periods to Oct. 31. It has gained 38.5% year-to-date. Its 5-year average annual compounded rate of return is 18.5%. That consistent outperformance has earned it a FundGrade A+ Award every year since 2015. While more volatile than the index and peer group, the fund has outperformed in both up and down markets. Over the past five years, it has participated in 130% of the upside, while participating in only 80% of the downside.

While lead manager James Stillwagon of T. Rowe Price is relatively new to the fund, he is very well versed in the sector. In addition, T. Rowe Price has significant bench strength, with a global team of 15 analysts covering the sector.

This is a very solid offering. In my view, however, its narrow mandate would prevent it from being a core holding in a portfolio. Instead, I believe it can be a way to help enhance return with its above-average growth profile.

TD Global Entertainment & Communications Fund
Fund company: TD Asset Management
Fund type: Global Equity
FundGrade: A (October)
FundGrade A+ Awards: 2015-2019
Style: Bottom-up growth
Risk level: Medium-High
Load status: Optional
RRSP/RRIF suitability: Good
Manager: James Stillwagon, T. Rowe Price, since November 2019
MER: 2.50%
Fund code: TDB324 (Front-end load); TDB384 (Low-load)
Minimum investment: $500

Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.

Notes and Disclaimer

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. Dave Paterson is employed as an advising representative (portfolio manager) by Empire Life Investments Inc. (ELII), a subsidiary of Empire Life Insurance Company. ELII is the investment fund manager and portfolio manager of the Empire Life Mutual Funds and the portfolio manager of the Empire Life Segregated Funds (collectively, the Empire Funds). As such, his employment and his compensation may be connected to the success of ELII and the Empire Funds. From time to time, the Empire Funds may buy, sell, hold, or otherwise have an interest in securities that may be discussed in this report.