| Fund Company | RBC Global Asset Management |
| Fund Type | High Yield Fixed Income |
| Rating | $$$$ |
| Style | Credit Analysis |
| Risk Level | Medium |
| Load Status | No Load / Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Frank Gambino since July 2003 Jane Lesslie since July 2003 |
| MER | 1.77% |
| Code | RBF 579 – No Load Units RBF 701 – Front End Units RBF 801 – DSC Units |
| Minimum Investment | $500 |
Analysis: For those looking for a well managed fund that invests in high yielding corporate and government bonds around the world, then this is a great place to start. While the focus is on developed markets, it can also invest in emerging market debt. As of September 30, the fund had 38% exposure to emerging markets.
Performance has been strong, providing index like returns on the upside, with better downside protection. This has resulted in a five year return of 9.8%, putting it well into the upper half of the category. Volatility has been reasonable and is in line with the category average. It held up reasonably well in 2008, losing 10.3%.
The managers employ a very active style and have levels of portfolio turnover that has averaged 100% for the past five years. Of note, management is more active in periods of uncertainty, as turnover rates have been on the decline since 2007 and 2008.
In the current environment, they have become more positive on U.S. high yield bonds over emerging market debt and have been taking action to increase the credit quality. In the past quarter, they have been reducing their exposure to BB bonds and increasing exposure to the BBB bonds. They like the U.S. and believe that it offers good relative value with low default prospects and feel that corporate fundamentals are the best they have seen in years. In reaction, they have increased the duration of the U.S. exposure, at the same time shortening the EM exposure.
Considering our review, we believe that this is a great high yield bond fund for most investors. It offers a strong management team, good performance, a reasonable 1.77% MER, and reasonable levels of volatility. For investors looking for high yield exposure, this is a great pick. A word of caution – given the focus on high yield, portfolio exposure should be limited to 10% to 20% of the portfolio, based on the risk tolerance of the investor.