| Fund Company | RBC Global Asset Management Inc. |
| Fund Type | U.S. Equity |
| Rating | $$ |
| Style | Growth |
| Risk Level | High |
| Load Status | No Load |
| RRSP/RRIF Suitability | Poor |
| TFSA Suitability | Poor |
| Manager | Ray Mawhinney since July 1995 Cameron Scrivens since February 2007 |
| MER | 2.21% |
| Code | RBF 274- No Load Units |
| Minimum Investment | $500 |
Analysis: Now classified as a U.S. equity fund since the demise of the Science and Technology category a couple of years ago, the RBC Life Sciences and Technology Fund has the investment objective of providing long term capital growth by investing in U.S. based companies that are involved in the life sciences and technology sectors.
True to its mandate, the fund currently holds three quarters of its assets in technology stocks and a quarter in health care stocks. The management team builds the portfolio on a bottom up basis, looking for companies with strong management, focused business models and a competitive advantage. Not surprisingly, given the sectors it invests in, the investment process that is employed is very much growth oriented. It is also very active, with the portfolio turnover averaging just under 200% for the most recent five year period. The fund holds just under 100 names, with the top ten making up approximately 30% of the fund.
The longer term performance numbers of this fund have been in a word, disappointing. For the ten years ending March 31, the fund has posted an annual loss of 3.7%. Putting that in dollar terms, if you made a $10,000 investment in March 2002, it would now be worth approximately $6,860. Shorter term performance is much more encouraging. For the most recent five year period, the fund has posted an annualized compound return of 2.8%, which has outpaced the broader S&P 500 and is middle of the pack of the other science and technology and healthcare funds which we follow. Volatility has been well controlled recently, with a standard deviation which is comparable to the broader market.
Recently, the manager has increased the fund’s exposure to small cap stocks. As of March 31, the fund held approximately 15% in small caps and just under 40% in mid cap companies. Given this relatively high exposure to small and mid cap stocks, it is our opinion that this may lead to an increase in volatility. The manager believes that both technology and healthcare are well positioned to do well in the next few quarters. They expect that many companies who are well stocked with cash will begin to deploy it with new investment in technology, which will help fuel growth and improve productivity.
Despite the manager’s optimism, we believe that there other funds in the sector that offer a more compelling risk reward profile. While it may be the lowest cost option in the category, we would favour the healthcare and technology offerings from CI, TD, and BMO Guardian over this fund.