The Canadian Corporate Fixed Income Strategy seeks to provide a relatively high level of income and reasonable stability of capital by investing in a well-diversified portfolio of fixed income securities issued primarily by Canadian corporations, though the strategy may invest in non-Canadian bonds denominated in Canadian dollars as well. The strategy is managed by the PH&N Investment Grade Corporate Credit team, a specialized team of 12 experienced investment professionals embedded within the broader PH&N Fixed Income Team.
- Actively managed, fully diversified strategy designed to provide income and reasonable stability of capital by investing primarily in high-quality Canadian corporate bonds.
- May invest in non-Canadian bonds denominated in Canadian dollars as well.
- Managed by the PH&N Fixed Income team’s specialized group of experienced credit analysts and researchers are supported by the resources and expertise of the firm's broader fixed income and equity teams.
- Benchmarked to the FTSE Canada All Corporate Bond Index
Investment philosophy and style
- The strategy’s primary objective is to add value while controlling risk.
- There are four distinguishing characteristics of the team’s philosophy:
- 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.
- Rigorous fundamental credit analysis is the primary requirement for long-term success. This can be enhanced – but not superseded – by valuation analysis.
- Active management strategies help the team benefit from changes in industry, individual security, and overall market conditions.
- An emphasis on risk controls, using strict guidelines and rigorous monitoring.
- This approach has been honed over many 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 selection of corporate bonds is driven by a disciplined three-stage credit analysis process involving:
- A “top-down” industry group screen, based on macroeconomic factors and overall industry outlooks.
- A “bottom-up” fundamental analysis of specific credits based on their rigorous internal credit review.
- An analysis of each bond’s structure (i.e., term call features, covenants, etc.) and the relative valuation of the issue versus comparable securities.
This process results in a portfolio of investment grade corporate bonds that provides an attractive yield premium relative to other fixed income securities while limiting specific issuer risk, industry group risk, and macroeconomic risk.
Our distinctive approach to building a corporate bond strategy is the result of a combination of the following resources:
Investment grade credit edge
Our approach to the corporate bond market
- 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. This tracking error can be dialed up or down depending on market conditions.