Managed by a team headed by Dan Janis, this tactically managed global bond fund focuses on four key risks for investors; interest rate risk, credit risk, currency risk, and liquidity risk. For the quarter, it gained 1.75%, outpacing its peers.
In a recent commentary, Charles Tomes, a trader, and member of the management team of this fund said they expect the recent high levels of volatility to continue. One reason for this view is the uncertainty caused by the divergent policies of many central banks, with some countries, like the U.S., looking to raise rates, and others looking to cut, or take other stimulative actions, such as quantitative easing. Another concern is the potential economic fallout that could result from China’s slowing growth rate.
In this environment, they do not hold any U.S. Treasuries. Instead, they have been focusing on U.S. corporate bonds. They have also been reducing their high yield exposure, instead, investing in higher quality, investment grade names. At the end of September, approximately 60% of the fund was invested in the U.S. For their global exposure, they continue to like countries where they expect a favourable interest rate outlook to remain in place. This includes Canada, New Zealand and Australia, which make up 20% of the portfolio. As the Canadian dollar has continued to drop, they have increased their currency hedge position to protect against adverse currency moves.
For emerging market holdings, they like countries that have strong fundamentals, with most of their exposure in three countries; Singapore, the Philippines, and South Korea. Each carries an investment grade credit rating, and are running a current account surplus.
On average, the fund’s duration is expected to range between 3.25 and 3.75 years. The duration policy is the result of their duration calls on each of their underlying country investments.
I continue to like this fund as an excellent diversifier within the fixed income sleeve of a portfolio. It is classified as a high yield fund, however, I tend to look at it more as an actively managed global bond fund. I expect that it will continue to deliver above average returns with average volatility.