| Fund Company | TD Asset Management |
| Fund Type | Canadian 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 | Gord MacDougall since October 2005
Gary Baker since October 2005 |
| MER | 2.54% |
| Code | TDB 628 – No Load Units
TDB 825 – Front End Units TDB 835 – DSC Units |
| Minimum Investment | $500 |
Analysis: Small cap stocks have been on quite a tear of late, and this Connor, Clark & Lunn managed offering has been one of the best performing funds. For the year ending April 30, it gained 40.6%, handily outpacing the index and most of its peer group. Longer term numbers are equally as impressive, with an annualized five year return of 22%, finishing in the top quartile.
The fund is managed using a core approach that involves top down macro analysis combined with fundamental, bottom up security selection. When analyzing a company, the managers look to gain an understanding of its long term operating strategy and the key contributors to its business model within the context of its industry. They focus on a company’s growth, valuation, and financial strength. With this information, they are able to set a price target for each company that is used to better understand the risk reward profile of each company.
In addition to the bottom up security selection process, the managers also use a top down macro analysis that is used to help set the sector mix within the portfolio. Working with CC&L’s fixed income team, they consider such factors as where we are in the business cycle and the outlook for interest rates, currencies and commodities.
The result is a well-diversified portfolio that holds approximately 120 names, with the top ten making up around 20% of the fund. At the end of April, it was underweight financials and energy and was overweight technology and consumer cyclical. It also skewed more towards companies that have higher growth rates than the broader market, but are a bit more richly valued.
Historically, the fund has been more volatile than its peers. It has also been able to outperform in rising markets, and match performance when markets are falling. Costs are in line with the category average.
While not my top small cap pick (Sentry Small / Mid Cap is my pick), this is definitely a good option if you are looking for a solid, basic, no frills type of a small cap fund. It has a strong management team behind it, average costs, and favourable risk reward characteristics.