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Analysis: Managed by the team of Brian Berghuis and John Wakeman, the TD U.S. Mid Cap Growth Fund seeks out well managed, medium sized companies operating in traditional growth industries. The focus is on those companies that have market caps of between $1 billion and $12 billion which have annual earnings growth rates of more than 12%. Companies must also be underpriced, relative to their growth prospects, before they are added to the portfolio. suitability.
The fund is very well diversified, typically holding between 125 and 175 names, across a wide range of sectors. As of February 29, there were 133 names in the portfolio, with the top 10 making up 22.5% of the fund. The manager is fairly patient in implementing their investment process. Portfolio turnover has averaged 40% in the past five years, which has added an average of 0.06% to the cost of owning the fund.
Not surprisingly, with its emphasis on growth, the fund is heavily weighted towards technology and industrials. Combined, those two sectors make up just less than half of the total fund. Instrument maker Ametek, retailer Dollar General, defence contractor Textron, and software maker Nuance are some of the names held in the portfolio.
Performance has been strong on a relative basis, with a five year compound return of 1.7%, handily outpacing the Russell 2000, finishing in the first quartile. The fund has been one of the least volatile funds in the category, with a monthly standard deviation that is well below the category average.
Cost is a touch on the high side, with an MER of 2.52%, roughly in line with the category average.
Overall, we believe that this is a good fund for investors who are looking to add exposure to U.S. mid cap stocks to their portfolio. Mid caps have the potential to add incremental return when incorporate in a well diversified portfolio. However, there may be periods of higher volatility. Therefore, we suggest that investor’s use this fund cautiously, limiting exposure in their portfolios to a maximum of 10% for the more aggressive investors, and lowered for more conservative investors.