| Fund Company | Phillips, Hager & North Investment Management |
| Fund Type | High Yield Fixed Income |
| Rating | Not Rated |
| Style | Credit Analysis |
| Risk Level | Low to Medium |
| Load Status | No Load / Optional |
| Manager | Hanif Mamdani since July 2000 |
| MER | 0.88% |
| Code | RBF 1280 – No Load Units RBF 6280 – Front End Units |
| Minimum Investment | $500 |
Analysis: If you don’t already own units of this great fund, then you are out of luck. It has been capped since November 2010, and there has been no discussion of reopening it anytime soon.
One of the differentiating factors of this high yield fund is that it focuses on higher quality issues in the high yield space. It focuses on medium quality corporate bonds, convertibles, and preferreds. At the end of August, 77% of its holdings were rated BB or lower.
It can invest anywhere in the world, but currently about 40% is in Canada, 55% in the U.S and the balance in other developed markets. The manager sets the sector mix of the fund based on their relative attractiveness based on the outcome of their macro analysis. Once the sector mix is determined, the managers conduct a fundamental analysis on a number of companies, looking at their free cash flow, and interest coverage ratios to determine quality.
It is conservatively positioned with a yield to maturity of 5.5%, which is well above the yield of the DEX Universe Bond Index. Its duration is 3.8 years, which is considerably less than the benchmark duration of 7 years. Because of this positioning, it will hold up better than the broader bond market when rates move higher. That was the case between May and September, when yields shot higher. In that period, the DEX Universe Bond Index was lower by 3.35%, while this fund was down by 0.14%.
Given the more conservative nature of the fund, its performance can be a bit of a mixed bag. It will likely lag in a market where high yield issues rally sharply higher, yet will hold up much better in periods of extreme uncertainty. Longer term, results have been very strong, handily outpacing the DEX Bond Universe and Global High Yield universe over the past 10 years. Volatility is also the lowest in the category. Another bonus is that it carries a rock bottom MER of 0.88%.
This has long been one of my favourites in the fixed income space and I expect it to be for the foreseeable future. It is a great way to add high yield exposure in your portfolio without taking on huge risk. The only drawback is that it is closed to new investors.