I will state my bias right off the top because at High Rock we are High Yield experts. It has been a good year for our funds:
AHY.un (Advantaged Canadian High Yield Bond Fund) has produced a better than 20% return year to date. (This is in no way a a recommendation to buy or sell these securities, it is just an example for illustrative purposes and historic returns are in no way a guarantee of future returns) . Our other fund HHY.un (High Rock Canadian High Yield Bond Fund) has also had strong total returns year to date (above 17%). (These are 2 of the 4 funds that High Rock manages for Scotiabank).
Canadian high yield bonds offer a very good, non-correlated asset class with reasonable risk adjusted returns:
With return on the vertical axis (higher returns at the top) and risk along the horizontal axis (higher risk to the right), C$HY (Canadian High Yield) has had better risk adjusted return (NE quadrant of the chart) than the TSX and Canadian or US government bonds.
In fact, as interest rates rise, as we have been seeing in the bond market over the last couple of days, Canadian high yield bonds are a proven place to be invested because they have 0 correlation to interest rates:
So we beilive that there is a place for this asset class in a portfolio to add diversification and lower potential risk. Again, this asset class should always be looked at in conjuntion with your total portfolio strategy depending on your risk tolerance, investing objectives and time horizon goals. Your advisor should know about this, but if not, we are happy to discuss it with you.
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist