The RBC North American High Yield Fixed Income strategy seeks to provide a high level of income and the opportunity for capital appreciation by investing primarily in a well-diversified portfolio of fixed income securities issued by Canadian and U.S. corporations. The strategy is centered on a strong quality bias with a focus on companies with stable to improving financial profiles. The strategy aims to achieve an average credit rating of BB while limiting exposure to the lower quality segment of the high yield market.
Strategy Overview
- A specialized, actively managed portfolio that aims to provide a high current income stream while attempting to limit downside risk.
- Invests primarily in medium quality (CCC minimum) Canadian and U.S. corporate bonds, convertible bonds, and preferred shares and government securities, traded in primarily Canadian and U.S. dollars.
- Average term to maturity of the strategy will range between 3 to 10 years. All foreign currency exposure will be hedged back to Canadian dollars, unless there is a compelling foreign-exchange return opportunity.
- We incorporate the analysis of material environmental, social, and governance (ESG) factors into our investment process, for applicable types of investments1.
1Certain strategies do not integrate ESG factors, including but not limited to money market strategies, index strategies and certain third-party sub-advised strategies.
Our Approach
Investment Philosophy & Style
- The strategy aims to provide a high level of income and opportunity for capital appreciation by investing in a well-diversified portfolio of high yield fixed income securities issued by Canadian and U.S. corporations.
- Emphasis on strong quality bias with a focus on companies with stable to improving financial profiles.
- The RBC Global Fixed Income and Currencies team’s fundamental credit and industry analysis process emphasizes higher quality securities, diversification, internal credit analysis, cash flows, and employing an active approach.
Investment Process
- The RBC Global Fixed Income and Currencies team’s multi-stage investment process starts with a bottom-up approach to search for issuers with attractive valuation characteristics and strong fundamentals. This is followed by a top-down risk management measure to ensure the overall portfolio is reasonably balanced in terms of industry, cyclicality, ratings, and market capitalization. The portfolio is then fine-tuned to optimize yield characteristics and curve/duration preferences.
Portfolio Construction
- Asset mix targets an allocation of 85% to 100% of the portfolio in fixed income securities and preferred shares and 0% to 15% in cash and short-term investments.