Scotiabank's Advantaged Canadian High Yield Bond Fund, managed by High Rock Capital, was featured in Dow Jones Newswire's Tip Sheet on 11/27/2012. A couple of highlights:
1. The 1yr performance of 14.3% based on NAV to 10/31/2012.
2. Wrong quote...the Fund not only can invest 80% in C$ HY, it is mandated to have a minimum of 80% in C$ HY at all times. This mandate was created to take advantage of our "Buy Canada" theme and to be the first pure-play in C$ HY.
3. The article talks about the capital structure of a corporation and the "seniority" of HY within that capital structure...something we have written a fair bit on. About 42% of our portfolio is at or near the very top of the capital structure as senior secured paper. That is to say, the bonds are backed by, in most cases, specific assets or guarantees of the company.
Have a read (sorry it is not in the right format yet):
CANADA TIP SHEET: Advantage High Yield Fund Focuses on Canada
high-yield bonds as a distinct asset class
bonds rank near top of issuers' capital structure
on burgeoning Canadian-dollar high-yield market
yield isn't what you think it is.
many investors, the phrase "high yield" evokes a highly speculative asset class
also known by the unflattering moniker "junk bonds."
Tepsich has a different perspective.
Tepsich, portfolio manager at High Rock Capital Investment, manages the
Advantaged Canadian High Yield Bond Fund for Bank of Nova Scotia
high-yield bonds as a distinct asset class that offers relatively high returns
with considerably less risk than is commonly
belief is the underlying assumption behind the fund. Launched on April 1, 2011
as a closed-end fund, it currently has assets under management of about 85
million Canadian dollars ($85.5 million).
fund is expected to convert to an open-ended mutual fund next March, Mr. Tepsich
to data provided by the bank, which isn't audited, the fund's class A units
have returned about 14.3% over the last 12 months. Since inception, the return
has been about 6.3%.
fund can invest up to 80% of its assets in Canadian high-yield
fund, effectively, was the first of its kind as a pure play Canadian dollar
high-yield fund," Mr. Tepsich said.
other assets that offer high returns, such as equities and income trusts,
high-yield bonds carry an obligation to pay the interest at the level
guaranteed by the fund's coupon.
things go bad, when 'risk off' comes into vogue, you're still getting your
coupon. You may lose on your mark-to-market, your bond values might drop, but
you're still collecting a big coupon," Mr. Tepsich
bonds are also near the top of the capital structure of most issuers and
out-rank equities in their claims against companies in the event of default, he
whole portfolio, 42% is in senior secured paper and 58% is in senior
combination of yield and safety, compared to other high-yielding assets,
reflects high yield's status as a distinct asset class. A lack of correlation
with other assets, notably government bonds, is more evidence of its distinct
status, Mr. Tepsich said.
asset class that should be attractive to Canada's growing cohort of senior
citizens, who are looking for yield but also want to avoid the risk and
volatility of equities, he said.
majority of your yield, at 65-plus years old, should be backed by an indenture,
not by a promise," he said.
still a relatively small market at about C$13 billion in outstanding issues,
the Canadian high-yield market is expanding rapidly, with new issues coming at
a pace of around C$5 billion a year. The market is quite liquid, and will
become more so as it grows in size, the manager
fund's concentration in Canadian high yield will shelter it somewhat in the
event of a fiscal catastrophe in the U.S., he said.
of the fund that isn't in Canadian-dollar high-yield bonds is invested in a
broad range of instruments, including investment-grade corporate bonds,
U.S.-dollar high yield and government bonds.
to Don Curren at email@example.com
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Dow Jones Newswires
27, 2012 12:00 ET (17:00 GMT)