TD Canadian Bond's strength lies in knowing its limits

The management team has proven its ability to add value by focusing on credit selection.

Shehryar Khan, CFA 10 April, 2018 | 5:00PM

The bond team at TD Asset Management (TDAM) likes to keep it simple when it comes to managing TD Canadian Bond. The managers focus on preserving their investors' capital and on their expertise in credit selection. By focusing on a lever where they have a proven ability to add value, and less so on trying to forecast future interest movements by managing the portfolio's duration, the fund improves its prospects of outperforming its benchmark -- the FTSE TMX Canada Universe Bond Index -- and passively-managed ETFs like  BMO Aggregate Bond ETF (ZAG). Combined with a strong performance track record and competitive costs, this fund merits strong consideration for investors seeking actively managed domestic bond exposure.

TDAM follows a team approach toward portfolio management, with Rob Pemberton, who joined the firm in 2000, heading the fixed-income team and serving as lead manager. He is backed by a deep 22-person portfolio management team and an independent 15-person credit research team. This approach minimizes the reliance on any one person and cultivates continuity of process in the event of staff turnover. The bond team is one of the largest in Canada with ample resources at their disposal.

Daily, biweekly and monthly meetings with other groups at TDAM help the team identify and debate macroeconomic themes. Management doesn't explicitly target a duration for the portfolio; rather, the fund's duration is an outcome of the team's yield-curve assessment and positioning.

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About Author

Shehryar Khan, CFA

Shehryar Khan, CFA  Shehryar Khan, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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