Government bonds
The government bond portfolio is the defensive core of the strategy. This asset provides regular interest coupons while reducing portfolio risk.
Corporate bonds and high-yield
The portfolio contains bonds issued by Canadian and foreign companies in various sectors. These high-quality, high-return securities can enhance the portfolio’s performance by providing credit spreads that historically cover most of the additional credit risk. High-yield securities may include bank loans traded in secondary markets. These loans have similar characteristics to high-yield bonds in terms of their credit risk and expected long-term returns. Since they are variable-rate instruments rather than fixed rate, they’re used to diversify exposure to credit risk.
Commercial mortgages and loans
The portfolio contains mostly mortgages issued to businesses and public sector entities for different types of real estate in Canada’s major urban centres. These assets play a similar role to corporate bonds, while providing additional compensation due to their illiquidity.
Quality of the bond and bank loan portfolio
Credit ratings | Provincial bonds ($) | Corporate bonds ($) | High-yield bonds (Alliance Bernstein) ($) | Bank loans (Alphafixe Fund) ($) | Total |
---|
($) | (%) |
---|
AAA | 0 | 10,199 | 0 | 0 | 10,199 | 0 |
AA+ to AA- | 5,829,101 | 771,409 | 0 | 0 | 6,600,510 | 54 |
A+ to A- | 238,920 | 1,302,523 | 1,477 | 0 | 1,542,920 | 13 |
BBB+ to BBB- | 0 | 981,619 | 203,401 | 404,679 | 1,589,699 | 13 |
BB+ to BB- | 0 | 0 | 714,571 | 886,002 | 1,600,573 | 13 |
B+ to B- | 0 | 0 | 621,324 | 242,194 | 863,518 | 7 |
Total |
6,068,021 |
3,065,750 |
1,540,773 |
1,532,875 |
12,207,419 |
100 |
Source: DGAM
Preferred shares
These securities are often presented as a cross between common shares and corporate bonds. Preferred shares typically provide high, stable dividend payments. This type of asset class is used to optimise portfolio diversification. At this time, the portfolio includes only Canadian securities.
Common shares
Common shares enable the portfolio to benefit from growth in the global economy and in profit margins. Stock market exposure also enables investors to capitalize on portfolio companies’ efforts to improve their profit margins. Owning shares requires accepting fluctuations in companies’ valuations and in economic cycle. The portfolio is diversified across Canadian, US and international equities (other developed markets and emerging markets).
Alternative investments (private equity, private debt, infrastructure, real estate)
Alternative investments are investments in private companies (outside the markets), real estate assets or infrastructure. Like with common shares, investors benefit from exposure to economic growth, but also from higher returns thanks to the value created by full asset control and discerning use of financial leveraging. These investments also offer good diversification compared to more traditional assets.
Specialized strategies
Specialized strategies round out the portfolio. They’re designed to be independent of market direction. Our portfolio includes a market neutral strategy that matches long (buy) and short (sell) positions in the stock of companies that are typically within the same industry. This approach gives investors positive, stable, low-volatility return potential, whether the market is up or down.