| Fund Company | Pembroke Private Wealth Management |
| Fund Type | Canadian Fixed Income |
| Rating | A |
| Style | Bottom up Credit Analysis |
| Risk Level | Low |
| Load Status | No Load |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Canso Investment Management |
| MER | 1.00% |
| Code | GBC 896 – No Load Units |
| Minimum Investment | $10,000 |
Analysis: With a modest MER and an experience management team at the helm, the GBC Canadian Bond Fund has been one of the strongest performers over the past five years. For the five years ending February 28, it gained 7%, handily outpacing the DEX Universe Bond Index and the majority of its peers.
To do this, the manager, Canso Investment Management has built a concentrated portfolio of corporate and government bonds. They focus on credit analysis and security selection. Their credit analysis process is very intensive, and assesses the credit worthiness of the issuer. They look for financial strength, management capability, and a favourable business environment. In addition to analyzing the issuer, the terms and conditions of the security are assessed. Only once they are fully comfortable with the bond, can they make an investment.
The portfolio is currently tilted towards corporate bonds, which make up two thirds of the fund. They have a great deal of flexibility, and can invest up to 49% outside of Canada. At the end of February, 30% was invested in foreign corporate bonds, and 6% in foreign government bonds.
With its focus on corporates, the portfolio’s yield comes in a just under 3%. The duration, which is a measure of sensitivity to interest rates, is listed at 4.6 years, which is well below that of the broader bond market. As a refresher, the shorter the duration of a bond or bond fund, the less sensitive it is to movements in interest rates.
The costs are reasonable, with an MER of 1%. However, when you consider that this is a no load fund, that cost is a bit rich, in my opinion. Still, it is lower than most other bond funds available.
Considering the above, it is my opinion that these factors are likely to allow the fund to outperform most other Canadian bond funds in a flat to rising bond market. That said, I still expect traditional bond funds to struggle compared with bonds that invest only in corporate or high yield bonds. Still, for those looking for a more tradition bond fund, this is a solid pick.
The drawback to this fund is that it has a high minimum initial investment of $10,000. It may also not be available through all dealers.