| Fund Company | TD Mutual Funds |
| Fund Type | U.S. Small / Mid Cap Equity |
| Rating | A |
| Style | Growth |
| Risk Level | Medium High |
| Load Status | No Load / Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Gregory McCrickard since November 1997 John Wagner since January 2006 |
| MER | 2.56% |
| Code | TDB 653 – No Load Units TDB 827 – Front End Units TDB 837 – DSC Units |
| Minimum Investment | $500 |
Analysis: Supported by one of the largest research teams in the industry, managers Gregory McCrickard and John Wagner of T. Rowe Price scour the U.S. looking for proven small and midsized businesses that are trading at reasonable valuations. When evaluating a company, they consider a number of factors including the quality of management, business strategy, and ownership by management and other insiders. In addition, they put each company through a rigorous fundamental review and look for solid financial characteristics such as low debt levels, access to capital and a strong financial outlook. Companies must be operating in what they consider to be a growth industry, and there must be drivers or catalysts for growth in place.
To help manage risk, the portfolio is very well diversified, holding more than 300 individual positions. The top ten holdings represent just under 12% of the fund. From a sector perspective, it is fairly evenly balanced between industrials, financials and technology, which combined make up slightly less than 60% of the fund. It has very little exposure to energy and materials. The investment process used is fairly patient, with portfolio turnover averaging approximately 30% in the past five years.
Performance has been very strong, gaining 11.9% for the five years ending February 28. This handily outpaced the Dow Jones U.S. Small Cap Index as well as the majority of its peer group. Looking at the longer term numbers, it has outpaced its peer group, but failed to keep pace with the index. Costs are a touch on the high side with an MER of 2.56%.
While we like the fund, the process and the management team behind it, we would be reluctant to add significant small cap exposure to any portfolio at the moment. Valuations compared to their large cap counterparts appear to be a bit rich at the moment. Instead, we would likely hold off until there is a more favourable risk reward profile within the category. However, for those who need U.S. focused small cap exposure in their portfolios and have a long term time horizon, this is definitely a fund that should be considered.