| Fund Company | Chou Associates Management Inc. |
| Fund Type | Global Fixed Income Balanced |
| Rating | C |
| Style | Credit Analysis |
| Risk Level | High |
| Load Status | Front End |
| RRSP/RRIF Suitability | Poor |
| TFSA Suitability | Poor |
| Manager | Francis Chou since inception |
| MER | 1.45% |
| Code | CHO 400 |
| Minimum Investment | $5,000 |
Analysis: The Chou Bond Fund, like the other funds offered by Chou, is a bit hard to classify. This is nothing like a traditional bond fund, and is managed with Francis Chou’s deep value conviction. Despite its name, it is classified as a Global Fixed Income Balanced Fund. This is because nearly 20% of the fund is invested in one U.S. equity holding. That holding, Resolute Forest Products was the result of a debt restructuring of AbitibiBowater, where shares were issued for its debt.
Notwithstanding that exposure, the fund invests in Canadian and U.S. bonds, including high yield and convertible bonds. As of March 31, it holds 50% in foreign corporate bond, 15% in Canadian corporate bonds, and 15% in cash. OF the names in the portfolio, there aren’t a lot of what I would call “household” names. It includes MannKind Corporation, Atlanticus Holdings Corporation, and RH Donnelly Inc.
Like other Chou Funds, the portfolio is very concentrated, with just 15 positions, not including the cash. This level of concentration, combined with the small cap focus of the holdings has provided one heck of a bumpy ride for investors. The fund’s standard deviation is more than five times that of a traditional bond investment.
Granted, returns have been higher as well, gaining 5.65% in the past three months while the Canadian bond market has been down 2.5%. In the past year, it’s gained more than 30%, outpacing every other fixed income fund in Canada by a wide margin.
Costs are fair, with an MER of 1.45% which is lower than a number of high yield and global bond funds.
This is not a typical bond fund, and should not in any way, shape or form be considered to be one. It is a very high high high yield bond fund, and has a risk profile that is higher than many equity funds. If you have a very high, nearly speculative appetite for risk and you are looking for a bond fund that is a bit different, then this might just be something to consider. If you are looking for anything close to a traditional bond fund, you might want to keep looking.