The strategy seeks to provide relatively high yields and stability of capital by investing primarily, directly or indirectly, in a diversified portfolio of global and Canadian credit assets across the investment grade and sub-investment grade spectrum.
In a low yield environment, fixed income investors are becoming more interested in global investment solutions as they seek to enhance yields and improve diversification within the fixed income portion of their portfolios. Our Multi-Strategy Credit strategy fills this need by seeking a balance between Canadian and global assets and also between investment grade and sub investment grade assets. It provides a solution for investors who are seeking enhanced returns and diversification from their fixed income portfolios.
Casting a wide net in fixed income
The Multi-Strategy Credit strategy is an actively managed fixed income strategy designed to invest in a diverse basket of global and Canadian credit assets with a focus on strong risk/reward characteristics and downside protection.
- The strategy provides diversified global and Canadian exposure to credit assets throughout the credit cycle, with an aim to provide higher potential returns than a traditional Canadian bond portfolio.
- Harnessing credit specialists across the globe, the strategy provides convenient access to multiple asset classes through a single portfolio. It is managed across a variety of credit assets classes, taking advantage of RBC GAM’s broad fixed income expertise.
- The dynamic asset allocation that the strategy employs helps to provide effective tools to navigate uncertain markets and to pursue higher yields.
- There is a high degree of flexibility to rotate between sectors and asset types in response to evolving market conditions.
- Defensive techniques are employed to tactically hedge risk. Integrated portfolio construction and risk management is applied across a range of opportunities.
Investment philosophy and style
- The primary objective of the strategy is to add value while controlling risk.
- There are four distinguishing characteristics of the team’s philosophy:
- An emphasis on the use of yield-enhancing credit strategies, such as investment grade bonds, high yield bonds, emerging market bonds, and mortgage debt
- The use of multiple underlying fixed income credit strategies to add value
- A conservative approach, with moderate positions taken concurrently in a number of sub-strategies focusing on the risk/reward profile for the strategy and portfolio overall
- An emphasis on risk controls, using strict guidelines and rigorous monitoring
- 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 and the expertise of multiple specialist investment teams.
- The team’s multiple-strategy approach means that the portfolio is constructed using a number of different precisely-calibrated 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 strategy uses a variety of sub-strategies that take advantage of securities not included within the strategy benchmark. These include high yield bonds, emerging market debt, mortgage debt, private placement debt, and convertible bonds. These sub-strategies are expected to form part of the strategic investment allocation and are key to achieving the strategy’s long-term return target.
What differentiates us - Benefits of our Multi-Strategy Credit strategy
A credible, well-diversified, multi-strategy credit solution from an established management team with a strong track record managing multi-strategy solutions across global fixed income markets.