Long Bond

The MB Long Term Fixed Income Fund strives to provide a moderate real rate of return, primarily through income, by investing in a diversified portfolio of Canadian debt securities.  The Fund will only invest in high quality debt.  Returns in excess of interest income will be gained through duration, yield and sector management.

McLean Budden practices active bond management strategies within a strict risk-control and screening regimen.  Employing a number of strategies allows us to add value for our clients over market cycles.

The Fixed Income Team formulates its investment intentions based on the six to twelve month outlook for inflation and interest rates.  Our strategy is based on analyzing economic and financial market research and evaluating the views of both the McLean Budden Asset Mix and Equity Teams.  The process produces targets for duration, credit and sector weightings, as well as U.S. pay commitments.  Integral to our process is the construction and output of a multi-factor bond model that identifies fair value levels.

The key criteria in our decision making include:

·      inflation expectations

·        monetary policy

·        economic growth expectations

·        spread premiums

·       shape of the yield curve

·       credit analysis of specific issuers

Each of these criteria is regularly examined by one of our specialists and then evaluated by the Fixed Income Team in weekly strategy sessions.

Investment Process

Portfolio Composition Credit Quality

Our credit quality guidelines for fully discretionary accounts are as follows:

BBB rated corporate bonds are never purchased.  In the event of a corporate downgrade, however, we may hold BBB securities where we believe the downgrade to be temporary.

We actively manage portfolio duration, or interest rate exposure, and strictly control the amount of risk that may be introduced into the portfolio by restricting the duration range to between 75% and 125% of the SC Long Term Index's duration.  The actual portfolio's duration is determined by our conclusions pertaining to valuation and inflation as discussed above.

Long-term bonds are primarily Government of Canada issues in order to maintain portfolio liquidity and control credit risk.  The portfolio's maturity distribution will depend on our forecasted change in the shape of the yield curve.

Sector commitments are determined by the absolute yield spreads between various bond categories as well as the trend in spreads over an economic cycle.  Higher yielding sectors such as Corporate and Provincial bonds will generally be overweighted over a market cycle, although these may periodically be under-weighted when either the spread premium is too low or there is a risk of spreads widening.

Our sector exposure guidelines are as follows:

Portfolios will only be invested in Canadian pension-eligible U.S. Pay securities.  Our U.S. Pay strategy will be implemented only when the relative return expectations are greater than those available for comparable Canadian fixed income securities.  Issuers can only be Canadian, or in a group referred to as “Supra-National”.  The U.S. Pay position is limited to ten percent of the bond portfolio.

The Long Term Fixed Income portfolio will typically contain 50 to 100 issues with a larger amount more evident when corporate issues provide favourable risk-adjusted opportunities.

The Fixed Income Team is responsible for analyzing monetary, fiscal and economic trends and developing the firm's interest rate forecast.  In addition to subscribing to the major Canadian bond rating agencies, the Team conducts significant internal credit research and consults with the Canadian Equity Team for their input on changes in corporate cash flows and “event risk” such as acquisitions, mergers or changes in the regulatory climate.  Our process of credit analysis enables a quick response to changing circumstances.  Corporate developments are discussed at the firm's morning meeting in conjunction with the Canadian Equity Team.

The Fixed Income Team is organized along industry sectors with each member responsible for evaluating the credit worthiness of issuers within their particular sector. The Fixed Income Team is in constant contact with the three equity teams at McLean Budden to assist in determining the financial status of a firm.

Turnover (purchases or sales as a percent of market value) will range between 100% to 250% per annum. McLean Budden's level of trading is highly influenced by the frequency and magnitude of changes in investment strategy.  The firm believes active trading is a secondary, but essential, component of our management style.

Fees

Segregated Bond
First $50 million		0.180%
Next $50 million		0.150%
Next $200 million		0.125%
Above $300 million		0.100%
Minimum fee $90,000 based on $50 million mandates.

Pooled

HNW Fees

Private Client

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