| Fund Company | TD Asset Management |
| Fund Type | Canadian Fixed Income |
| Rating | $$$$ |
| Style | Credit and Term Structure Analysis |
| Risk Level | Low |
| Load Status | No Load or Optional Load |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Satish Rai since June 1988 Geoff Wilson since January 2002 |
| MER | 1.11% |
| Code | TDB 162 – No Load Units TDB 306 – Front End Units TDB 336 – DSC Units |
| Minimum Investment | $500 |
Analysis: The TD Canadian Bond Fund has been one of our favourites for the better part of a decade. Looking at the performance, it’s not hard to see why. It has historically been one of the best performing bond funds in the country, consistently finishing in the first or second quartile, on both an absolute and risk adjusted basis.
With Geoff Wilson managing the day to day operations, the fund tends to be heavily weighted towards corporate bonds. As of February 29, the fund held 58% in corporates. In comparison, the DEX Bond Universe holds only 27%. Further, the fund holds 38% in government bonds, just slightly more than half the weighting of the index.
Despite the higher weighting in the riskier corporates, the fund is fairly conservatively positioned. The duration is 6.4 years, which is shorter than the index. The lower the duration, the less sensitive a bond or bond fund is to the movements of interest rates. For periods when rates are expected to rise, the shorter duration funds will hold their value better. The yield is also higher at 4%, above the 3.7% yield of the DEX.
The costs of the fund are reasonable with an MER of 1.11%, making it one of the more attractively priced funds in the category.
With interest rates expected to begin moving higher in the next few quarters, it is widely expected that corporate and high yield bonds will hold up better than government bonds. According to the manager, it is expected that the demand for corporate bonds is expected to remain strong relative to their supply because of their higher yields and the strong company balance sheets of many bond issuers.
Given the size of the fund the manager are not overly tactical, instead, making any shifts to the fund’s positioning on a more gradual basis. We believe that the fund is well positioned to perform well on a relative basis when interest rates begin to move higher. We are maintaining our rating at $$$$