| Fund Company | TD Asset Management |
| Fund Type | Canadian Equity Balanced |
| Rating | $$$$ |
| Style | Large Cap Blend |
| Risk Level | Low – Medium |
| Load Status | No Load / Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Doug Warwick since June 1989
Michael Lough since July 2005 Geoff Wilson since January 2010 |
| MER | 1.48% |
| Code | TDB 622 – No Load Units
TDB 821 – Front End Units TDB 831 – DSC Units TDB 113 – Low Load Units |
| Minimum Investment | $500 |
Analysis: While the name of this fund may suggest that it provides investors with a reasonable income, it is our view that this fund is better used as a core balanced fund within a well diversified portfolio. While it does pay a monthly distribution of $0.031 per unit, it translates into an annualized yield of approximately 2.2%, which is low compared to some of the other available options.
Despite the low yield, we believe that this is a great core fund for most investors and it is only likely to get better given the recent changes to the bond sleeve. Until early 2010, the bond exposure was predominantly high yield bonds. While this may have provided the potential for return, it also raised the volatility profile of the fund. When Geoff Wilson took over the bond portion of the fund in January 2010, it began to look at lot more like the TD Canadian Core Plus Bond Fund, which has been one of our favourites for a while.
Managing the equity component is the team of Doug Warwick and Michael Lough who focus high quality, dividend paying stocks that have a history of earnings growth. The end result is a portfolio of 60 to 80 large cap stocks. Given the focus on dividends, it is not surprising to see that it is heavily overweight in financials, utilities and energy, with virtually no exposure to materials or technology.
The broader asset mix is managed by Warwick. Portfolio turnover is very low, averaging around 10%. It was higher in 2009 and 2010 when the portfolio underwent a bit of a transition to the fixed income sleeve. Prior to that, it was very heavily weighted towards high yields, but after 2008, the company took some steps to reduce the risk profile of the fund. This should help provide better downside protection in periods of market volatility.
Performance has been very strong on both an absolute and relative basis, with the fund finishing in the upper half of the category in every year since 2002, with the exception of 2008, where the high yield exposure dragged performance.
We like the lower volatility bond component of this fund and expect that it will result in better risk adjusted returns for investors going forward. We see this fund as a good core bond holding for low to medium risk investors.
Given the above, we are reaffirming our $$$$ rating.