Trimark Canadian Bond Fund

The investment team strives to generate interest income plus the opportunity for capital gains while preserving investors' capital.  The team uses an analytical approach that considers both the macroeconomic outlook and issuer-specific fundamentals.  They place a great deal of emphasis on relative value and rigorous credit analysis, with additional consideration placed on interest rate anticipation and yield curve positioning.  Emphasis is placed on corporate bond holdings where the investment team is able to utilize their expertise in credit analysis to seek a yield advantage over government bonds. Credit analysis also enables the team to capitalize on opportunities for spread movement based on credit upgrades or improvements, as well as mispricing of corporate bonds in the market. Holdings are added to the portfolio with a long-term focus where economic and business cycles are analyzed over years as opposed to months.  As such, the investment team implements a “buy and hold” strategy with the goal of minimizing turnover.  This long-term investment horizon contributes to low trading/execution expenses.  The portfolio management team follows the “prudent man rule” ensuring there is an appropriate balance between the investment objectives and risk exposure.  The investment team manages portfolio risk by optimizing diversification (by issuer, by sector, by maturity).

The fixed income portfolio management team believes that incorporating rigorous credit analysis is an ideal means to achieve superior fixed-income returns while minimizing risk.  The fixed income research involves both a comprehensive review of the universe of available securities and intense in-house scrutiny of the creditworthiness of the issuer.  In addition, the team benefits from the ability to leverage the in-house expertise of the equity team's fundamental company analysis. The fixed income investment team has extensive experience in credit analysis, which it utilizes when selecting corporate bond holdings.

Investment Process

The portfolio management team targets high-quality businesses with demonstrated growth potential that are attractively priced relative to their prospective earnings and cash flow to achieve long-term capital growth. The portfolio management team focuses on companies that offer strong management, industry leadership, a stable financial structure and a demonstrated commitment to securing a competitive advantage.  A great deal of emphasis is placed on the quality of company management. The portfolio management team's thorough, proprietary research enables them to identify attractive businesses whose stock price understates the intrinsic value of the company, enabling the team to take advantage of market inefficiencies. 

1.Screen of potential candidates
An examination of cash flow stability and debt service measures are examined generally over a minimum of one business cycle.

2.Research of company and strength of management
The investment team will meet with the company's management (often in conjunction with members of the equity team) to assess the company as a business and track record of the management team.  Their focus is directed to assessing the ability of management to formulate and execute a defensible business strategy.

3.Analyze company's credit statistics
The investment team will conduct their own credit analysis of the company and do not solely rely on the credit rating agencies. Cash flow and asset valuation sensitivities are assessed to measure credit risk.

4.Analyze bond terms and conditions
The investment team will examine the specifics of the bond indentures.  They will pay attention to covenants that govern the rights of the issuer and investor. A complete understanding of these provisions will ensure appropriate risk assessment.

 5.Evaluate relative value
The investment team will compare the issue to similarly rated bonds, bonds offered at similar yield spreads, issuers within the same industry etc. in order to determine a fair yield spread (valuation). They focus on investing in attractive risk/return opportunities.

6.Make decision and monitor
If the bond is attractively priced relative to its risk profile, and if the business thesis supports the ability of the issuer to cover its obligations over the term of the bond, they will make their investment.

If they decide not to invest yet still believe the business case is sound based on their research, they will continue to monitor the issue and will purchase the bond in the future if the yield spread becomes suitably attractive.

The fixed income portfolio management team believes that rigorous credit analysis is an ideal means to achieve superior fixed-income returns while minimizing risk.  The fixed income research involves both a comprehensive review of the universe of available securities and intense in-house scrutiny of the creditworthiness of the issuer.  In addition, the team benefits from the ability to leverage the in-house expertise of the equity team's fundamental company analysis. The fixed income investment team has extensive experience in credit analysis, which it utilizes when selecting corporate bond holdings.

Fixed income investments are selected based on:

Relative value analysis (60%)
Interest rate anticipation (20%)
Yield curve positioning (20%)

Relative value analysis primarily considers the differences in interest rates between major fixed income asset classes (federal, provincial, municipal, corporate) and among individual securities.  The portfolio management team spends a considerable amount of research time attempting to uncover favourable risk-reward opportunities. The team's approach to selecting corporate bond holdings is extremely similar to the due diligence process that the equity team undertakes in a thorough, bottom-up analysis of each potential investment.  In many cases, they are also able to capitalize on the extensive research completed by the equity team. The portfolio management team uses their expertise in credit analysis to find corporate bonds whose value is not fully recognized by the market.

Interest rate anticipation and yield curve positioning decisions are typically formulated with a one to two year outlook.  Monetary, fiscal, demographic and political developments are monitored (globally and domestically), to properly recognize possible changes to longer-term trends in interest rates.  This macroeconomic analysis establishes a framework from which the firm identifies the current position of the economic cycle and which will help in setting a duration target range.  The portfolio management team is conservative in its view of duration and, on average, maintains a similar duration target to the Scotia Capital Markets Universe Bond index.

Fees

HNW Fees

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