Our Canadian Core Plus Fixed Income strategies seek to provide relatively high yields and stability of capital by investing primarily in a diversified portfolio of fixed income securities issued by Canadian governments and corporations, and similar securities outside of Canada. The strategies are actively managed using interest rate, credit, and liquidity strategies, and their duration is managed within a +/- two year range relative to that of the strategy’s benchmark. Our Canadian Core Plus Fixed Income strategies are available managed to short and universe indices.
To achieve their investment objectives, the strategies will utilize “core” fixed income instruments found in their benchmark, as well as contain a significant allocation to non-benchmark securities, including mortgages, high yield corporate bonds, and emerging market debt.
- The strategies invest primarily in fixed income securities issued by Canadian governments and corporations as well as similar securities outside of Canada
- Have the flexibility to use out-of-benchmark strategies such as high yield bonds, global bonds and conventional mortgages. There are times when the strategy will have significant allocations to these securities
- Use multiple fixed income strategies for strong diversification and stable returns
- Duration is managed within a +/- two year range relative to the benchmark
- Actively managed using interest rate, credit and liquidity strategies
- Inception Dates:Canadian Core Plus Fixed Income Strategy: July 2013; Canadian Short Core Plus Fixed Income Strategy: September 2020
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 added value, 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.
- 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.
- 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.
- The team uses proprietary risk systems to monitor and measure the active risk budget for every portfolio they manage.
- The Canadian Core Plus Fixed Income strategies pursue a number of “plus” strategies that take advantage of securities not included in their benchmarks. These typically include mortgages, high yield corporate bonds, and emerging market debt. Each of these strategies are limited in scope and, in aggregate, are not expected to add significant volatility to the portfolio. The Canadian Core Plus Fixed Income strategies may also invest in convertible bonds and bonds with warrants, common equity, preferred shares, REITS and income trusts, non-Canadian securities, and non-hedged currency exposure.