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There aren't too many mutual funds these days that turn away investors, so when one of the best in the business opens the wicket for a limited time you can be sure there will be strong demand.
Such was the case when the 14-year-old PH&N High Yield Bond Fund re-opened to new investors a month ago for the first time in nearly four years, saying "recent opportunities provided the portfolio manager with a limited amount of additional capacity for the fund."
The award-winning fund, started by RBC's Vancouver-based Phillips, Hager & North Investment Management unit when it was still independent, is one of the oldest and most established high-yield bond funds in Canada, boasting an average return of 8.1 per cent over the past decade. The management expense ratio for the fund is 0.87 per cent, according to their website, among the lowest for its category.
The fund had about $3.2-billion under management in mid-October, a figure which has risen by more than $300-million with the influx of new funds, evidence of the strong demand from investors for a steady-performing, low-fee investment. The window is drawing to a close, RBC said Wednesday: new investors only have until 4 pm Nov. 26 to get their orders in before the fund is capped again.
Sources familiar with the situation say PH&N capped new investors from investing in the fund in November 2010 due to concerns about a lack of investment opportunities. However, the outlook improved earlier this fall as benchmark high-income corporate bond yields spiked by more than 150 basis points, to about 6.5 per cent from 4.85 per cent, thanks to a rash of new issues stemming from busy merger and acquisition activity. That gave the PH&N fund a window of opportunity to deploy new cash for "good paper at interesting valuations" than have been available for some time, one source said.
That, plus the fund's active management, have kept returns at over 7 per cent in the past year despite market yields of about 4.5 per cent over the period. No doubt new investors will be happy to get into what one investment professional describes as "a sleep-at-night, high-yield-without-high-anxiety" fund.