| Fund Company | TD Asset Management |
| Fund Type | Miscellaneous – Sector Equity |
| Rating | A |
| Style | Growth |
| Risk Level | Medium – High |
| Load Status | No Load / Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | T. Rowe Price Associates since October 2008 |
| MER | 2.83% |
| Code | TDB 645 – No Load Units
TDB 322 – Front End Units TDB 352 – DSC Units |
| Minimum Investment | $500 |
Analysis:Science and tech funds have been on a tear recently, and this has been one of the best performers in the category. For the year ending May 31, it has gained 44%, and was up an annualized 22.4% for the past five years.
It is managed by T. Rowe Price using a fundamentally driven, bottom up, and proprietary research process that is both quantitative and qualitative in nature. Within the team, it is very much a collaborative approach, where analysts and portfolio managers share ideas and knowledge across industry sectors and geographies.
They are looking for medium to large technology companies located anywhere around the world. At the end of May, more than 70% was invested in the U.S., 16% in Europe, 10% in Asia, with the rest in cash. Their focus is on well managed companies with strong or increasing market share, and product pipelines that appear to put the company in a position for long-term growth. The investment process is predominately growth focused, however, the managers do pay attention to valuation to ensure they are not overpaying for growth. One way they do that is to focus on multiples, to make sure they are reasonable compared with the company’s history, its peer group, and the broader market.
The portfolio holds 56 companies with the top ten making up about half the fund. The fund is very actively managed, with portfolio turnover averaging more than 100% per year.
As mentioned above, performance has been very strong, consistently outpacing its rivals in the tech space. Volatility has been higher than the category average, and given the narrow focus of the mandate, it is likely to have periods where volatility is well above average. Because of this, it is definitely not a core holding, and should only be considered by those who are comfortable taking on a higher level of risk.
While some exposure in a portfolio may help to boost returns, it may also add to the overall volatility of your portfolio, because it is highly correlated to the S&P 500. Another concern I have is the cost, with an MER of 2.82%, which is expensive compared to its peers. Given that, I’d limit the exposure to between 5% and 10% for most growth focused investors.