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The Canadian Alpha Plus Fixed Income strategy seeks to provide relatively high yields and modest capital appreciation by investing primarily, directly or indirectly, in a diversified portfolio of fixed income securities issued by Canadian governments and corporations and similar securities outside of Canada. Leverage will also be employed through the use of derivatives. Derivatives will be employed to create additional capital, which will be used to invest in absolute return strategies (including those that incorporate currencies, bonds, derivatives and equities) in order to achieve the investment objective.

Our approach

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:
    • 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.

Investment process

The team’s four-stage investment process involves:

  1. 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.
  2. 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.
  3. 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.
  4. 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.

Portfolio construction

  • 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.
  • Sector concentration limits for the strategy are as follows:
    • Canadian Federal & Provincial Government: maximum of 100%
    • Cash: maximum of 25%
    • Corporate: maximum of 70%
    • Maple bonds: maximum of 10%
    • Foreign securities: maximum of 30%
    • Non-Canadian dollar exposure: maximum of 20%
    • Mortgages: maximum of 10%
    • Illiquid assets: maximum of 10%
    • Real return bonds and treasury inflation protected securities: maximum of 10%
  • Credit quality limits for the strategy are as follows:
    • AAA: maximum of 100%
    • AA+ to AA-: maximum of 100%
    • A+ to A-: maximum of 100%
    • BBB+ to BBB-: maximum of 25%
    • BB+ to B-: maximum of 10%
    • CCC+ to CCC-: maximum of 1%
    • Below CCC-: maximum of 0%

Additional information

Inception
June 2016
Primary benchmark
FTSE Canada Universe Bond Index
Vehicle
Canadian Investment Fund

Investment team

PH&N Fixed Income team

Deep and experienced team with an established approach to adding value while controlling risk

Connect with our team to learn more

Contact us

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