Our Canadian Core Fixed Income strategies seek to provide relatively high yields and stability of capital by investing in Canadian core fixed income instruments as well as non-benchmark securities, including mortgages, and high yield bonds. The strategies are actively managed using interest rate, credit, and liquidity strategies, and their duration is managed within a +/- one year range relative to that of the strategy’s benchmark. Our Canadian Core Fixed Income strategies are available managed to short, universe, and long indices.
- Canadian Core Fixed Income strategies invest primarily in fixed income securities issued by Canadian governments and corporations as well as guaranteed mortgages and foreign bonds
- Have the flexibility to use out-of-benchmark strategies such as high yield bonds, global bonds and conventional mortgages
- Use multiple fixed income strategies for strong diversification and stable returns
- Duration is managed within a +/- one year range relative to the benchmark
- Actively managed using interest rate, credit, and liquidity strategies
- Inception Dates: Canadian Short-Term Fixed Income Strategy: January 1993; Canadian Core Fixed Income Strategy: July 2013; Canadian Long-Term Fixed Income Strategy: April 1995
Investment philosophy and style
- The primary objective of these strategies is to add value while controlling risk.
There are four distinguishing characteristics of the team’s philosophy:
- The use of multiple underlying fixed income strategies to add value
- A conservative approach, with moderate positions taken concurrently in a number of strategies focusing on the risk/reward profile for the strategy and portfolio overall
- An emphasis on risk controls, using strict guidelines and rigorous monitoring
- An emphasis on the use of yield-enhancing strategies, such as foreign, corporate and provincial bonds, and mortgages
- This approach has been honed over more than thirty years, and aims to provide consistent and predictable value-added, whether in terms of total return or in terms of income objectives. The key to achieving these objectives is to have many strategies working for the portfolio at the same time.
The team’s four-stage investment process involves:
- Identifying opportunities: The team identifies attractive investment opportunities with favourable risk/reward characteristics by analyzing strategies within a framework of three indicators – economic fundamentals, valuation, and sentiment/technicals
- Communication, coordination, and relative value analysis: The size of any one position will depend on the strength and consistency of the measurements signaled from the three indicators mentioned above, and the fund manager’s convictions stemming from their own research and input provided by strategy specialists. The team incorporates a comprehensive risk-based approach that includes environmental, social, and governance (ESG) downside risk analysis for applicable types of investments.*
- Portfolio construction: Once the team has identified the appropriate strategies, they analyze them within a total portfolio context in order to build a portfolio containing the best strategies capable of producing stable and predictable returns based on their investment outlook, while mitigating downside risk.
- Monitoring: Using our proprietary technology, we regularly create one or more hypothetical portfolios to evaluate the investment structure and performance versus our expectations. Performance and attribution is measured and monitored on a daily basis to ensure strategies are performing as expected.
*Certain investment strategies or asset classes do not integrate ESG factors, including but not limited to money market, passive and certain third-party sub-advised strategies.
- Portfolios are constructed using a consistent and repeatable process, with inputs from many individuals within the PH&N Fixed Income Team.
- The team’s multiple-strategy approach means that the portfolio is constructed using a number of precisely-calibrated different strategies, subject to strict risk controls.
- A multi-stage compliance procedure ensures that the portfolio construction process remains consistent and adheres to the team’s guidelines.
- We use proprietary risk systems to monitor and measure the active risk budget for every portfolio the PH&N Fixed Income Team manages.