PH&N Bond Fund

Analysis: This has long been one of my favourite bond funds available to Canadian investors. Looking at the fund’s track record, it’s not hard to see why. It has consistently posted returns on both an absolute and risk adjusted basis that are near the top of the Canadian fixed income category.

These results are due to the disciplined process that the PH&N Fixed Income Team uses in managing the fund. They utilize a number of strategies when setting the fund’s allocation including duration and yield curve management, investing in corporate bonds, and taking advantage of trading opportunities as they arise.

The fund holds 46% in government bonds, with about two thirds of that exposure in provincial bonds. They like provincials over federal bonds because of their higher yield, which should provide a touch more downside protection in a volatile market. 42% is invested in corporate bonds with the balance in cash. Credit quality is very high, with all the holdings rated as investment grade. The duration and yield are in line with that of the DEX.

While I still like the fund, I believe that over the near term, the PH&N Total Return Bond Fund will be a better choice. Unlike this offering, it can invest in high yield, mortgages and some derivative strategies which should help as rates move higher.

Another factor to consider with this offering is the version you buy. If you can access the Series D units with their 0.61% MER, this is a great bond offering. However, if you have to buy one of the series with the higher cost, the attractiveness also falls. For the past year (to June 30), the Series D units were basically flat, while the Advisor sold series dropped by 0.56%.