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Approach to Fixed Income
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The key characteristic of our selections from among high-quality federal, provincial and corporate bonds is a balanced top-down/bottom-up approach that reflects our analysis of potential yield and the general level of interest rates.
| Our Balanced Approach |
| Top-Down: Yield Curve Analysis |
Bottom- Up: Credit Analysis |
- Our risk assessment focuses on the intermediate term, tempered by long-term influences.
- Target yield curve, interest rate and sector exposures selected.
- Major changes to overall interest rate or yield curve outlook are made infrequently.
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- Non-Canada credits are analyzed individually to ensure consistency with the business cycle and interest rate forecast.
- Spread analysis offers yield pick-up.
- External research and credit agency reports are used as inputs.
- Adds income and return by investments in high quality corporates and provincials.
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Fixed Income Portfolio Construction
We use a balanced approach across high-quality investment grade securities: Government of Canada, provincials and corporates. There are sector ranges for each major category: government and corporate.
- Sector ranges for term are Short (1-5), Mid (5-10) and Long (10+) for universe mandates and short and mid for most private client portfolios.
- No more than 5% is invested in any one corporate name.
Sell Criteria
- Anticipated changes in interest rates.
- Changes in credit conditions and/or risk-reward profile of securities.
- Anticipated changes in the general level of interest rates.
Monitoring and Review
- The Fixed Income team meets formally every week to assess factors affecting your fixed income securities.
- Major changes are made infrequently.
- Portfolios are fine-tuned on a constant basis as the economic picture evolves.
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