TD's new global bond funds may hold gold

Veteran manager Scott Colbourne rejoins fixed-income team.

Rudy Luukko 21 November, 2017 | 6:00PM
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A global bond fund isn't where you'd expect to find gold. But that's one of the characteristics of the newly launched TD Global Income and TD Global Unconstrained Bond. Also noteworthy for these funds, which TD Asset Management Inc. formally launched today, is their veteran portfolio manager Scott Colbourne, who rejoined the company on Nov. 1 as managing director, global active fixed income.

The two new offerings bring to three the number of TD funds in the Global Fixed Income category. They join TD Global Core Plus Bond. All three funds are able to invest in both developed and emerging markets around the world, and in both investment-grade and high-yield securities. But in practice, TD Global Core Plus Bond hasn't been particularly global. At last report, 43% of its assets were Canadian, and most of the rest -- 44% -- were American.

Drawing on his extensive experience as a global manager, Colbourne is likely to provide much greater exposure outside Canada generally for the TD fixed-income line-up, and especially outside North America including both developed and emerging markets. High-yield securities may also play a greater role.

Colbourne's weightings will be based on fundamental economic analysis of countries and currencies. The ability to hold gold, through exchange-traded funds, gives him another hedging tool in addition to active currency management.

Gold is certainly a familiar asset class for Colbourne, who was previously co-chief investment officer and a senior portfolio manager with Sprott Asset Management, a firm very active in investing in gold and other precious metals.

According to the TDAM prospectus, both TD Global Income and TD Global Unconstrained Bond can invest up to 10% of their assets in ETFs that provide unleveraged exposure to gold. While this adds an element of diversification to the portfolios, it also introduces commodity risk. This is unusual for a bond fund, though not unique. Sprott Diversified Bond, which Colbourne previously managed, has a similar provision.

Colbourne's role at Sprott focused on absolute-return strategies in the global fixed-income market, for which investing in gold played a supporting role. He joined Sprott in 2010 from TDAM, where he had been employed since 2007 as a member of the fixed-income team. Colbourne's past employers also include AGF Investments, where he received multiple awards as the manager of AGF Global Government Bond. He began his investment career at the Bank of Canada, where he was a trader.

As an active manager, Colbourne will have a much higher fee hurdle to clear than those of passively managed fixed-income ETFs. For TD's no-load Investor series, the management fee is 1.20% for TD Global Income and 1.30% for TD Global Unconstrained Bond. TDAM has capped the management-expense ratios for this series at 1.59% and 1.70% respectively. Numerous other purchase options are available, including series for commissioned and fee-based advisory accounts, discount-brokerage clients, and high-net-worth accounts.

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About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

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