| Fund Company | TD Asset Management |
| Fund Type | Healthcare Equity |
| Rating | $$$ |
| Style | Growth |
| Risk Level | Medium High |
| Load Status | No Load / Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Kris Jenner since January 2000 |
| MER | 2.82% |
| Code | TDB 976 – No Load Units TDB 320 – Front End Units TDB 350 – DSC Units |
| Minimum Investment | $500 |
Analysis: With the U.S. election in November, healthcare will again be brought to the forefront. Despite the potential uncertainty that this will cause, there are still significant growth opportunities in the sector. Not to mention that healthcare has a history of being a wonderful defensive play in volatile markets. Given the expected market forecasts for the near to medium term, a little defense can do a portfolio good.
Along with the growth opportunities created from the rapid development of the emerging markets and the research and development on life saving drugs, there has also been unprecedented dollars spent on life enhancing drugs, as the baby boomers spend countless dollars to try to reclaim their youth. Further, as more people gain access to health care coverage the demand for drugs and treatments will inevitably increase. The combination of these factors provides solid growth prospects, and good downside protection in volatile markets.
One of our favourite funds in the sector is the TD Health Sciences Fund. It invests in companies that are involved in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences. To qualify for selection, companies must derive at least 50% of their assets, revenues, or operating profits from those activities. The manager tends to focus in the U.S. where nearly 81% of the fund is invested.
Volatility is in line with the category average, which is impressive given its focus on mid cap names. Performance has been strong on an absolute and relative basis, posting first quartile performance in all time periods, and handily outpacing the Dow Jones Global Health Care Index.
Health care has historically been a good defensive sector in periods of market volatility. For example while the MSCI World Index plummeted by more than 35% between June 2008 and February 2009, the TD Health Sciences Fund was down by 10.5%.
Another reason we like this fund is that is has exhibited a relatively low level of correlation to the traditional asset classes. As of July 31, the correlation between the TD Health Sciences Fund and the S&P/TSX Composite was 0.22. This will allow it to provide some reasonably compelling diversification benefits when included in a well-diversified portfolio. The biggest drawback to this fund is its cost, with an MER of 2.82%. That said, to date, it has more than justified this cost when considering the risk reward profile and historic return.