| Fund Company | RBC Global Asset Management |
| Fund Type | Global Fixed Income |
| Rating | $$$$ |
| Style | Credit Analysis |
| Risk Level | Low – Medium |
| Load Status | No Load / Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Frank Gambino since August 2004 Soo Boo Cheah since December 2009 Marty Balch since June 2009 |
| MER | 1.74% |
| Code | RBF 580 – No Load Units RBF 753 – Front End Units RBF 853 – DSC Units |
| Minimum Investment | $500 |
Analysis: With interest rates hovering near historic lows, fixed income investments have never looked so risky. As interest rates rise, bond prices will be pushed lower, eroding the value of your investment. There are a couple things you can do to protect yourself. One way is to invest in shorter term bonds, which aren’t impacted as much by changes in interest rates. The other option is to invest in high quality corporate bonds which offer higher yields than traditional government bonds.
The RBC Global Corporate Bond Fund is a great way to access to the corporate bond sector. Managed by Frank Gambino and his team, they look to build a portfolio of high quality corporate bonds that are issued by companies that have stable or improving credit profiles and that are trading at a discount to their real worth.
As the name suggests, this fund is very global in nature. As of April 30, 47% was in the U.S., 29% in Canada, 17% in international bonds, and just under 8% in emerging market bonds. The credit quality is strong, with nearly 70% invested in bonds that are rated BBB or higher. The fund can invest up to 30% in high yield and emerging market bonds. The portfolio is well diversified, holding more than 500 positions with the top 10 making up a mere 7.1% of the fund.
Looking ahead, the manager has a favourable outlook on corporate bonds given the strong health of many U.S. and Canadian corporations. Other factors that are supporting corporate bonds include valuation and investors’ need for yield.
Given this outlook, they intend to maintain an overweight position in quality high yield bonds, and will look to take advantage of a number of European investment grade corporate bonds as the opportunities arise.
While corporate bonds have the potential to provide better downside protection in a rising rate environment, they can also be more volatile than a traditional government bond. Because of this, you should exercise caution when bringing corporate bonds into your portfolio. We would suggest that this fund make up no more than half of your fixed income weighting in your portfolio.