Fund in Focus: Ninepoint Diversified Bond Fund

Targeting 4%-6% return

Ninepoint Diversified Bond Fund is a North American-focused bond fund with a flexible mandate allowing the manager to invest across the capital structure. The fund takes an absolute return approach and aims for a 4% to 6% return, net of fees over a rolling three-year period, regardless of interest rates

The fund’s management team is headed by fixed-income veteran Mark Wisniewski. Their disciplined investment process blends top-down macro views, thematic tactical trades, and bottom-up security selection. Management tools at their disposal include the ability to alter interest-rate sensitivity, currency exposure, security mix, and credit quality either to capture potential upside or to reduce or manage risk.

Given the current credit environment, the manager is more defensively positioned. Duration is about four years, compared to roughly 7.5 years for the broader Canadian bond market. Yield to maturity is also significantly higher than the benchmark.

The fund is heavily weighted toward corporate bonds, with a 73% weighting, and 16% in government bonds. Average credit quality of the portfolio is BBB. Given the current market, the managers don’t expect to dramatically change that positioning but will continue to improve credit quality where possible. They are also exploring ways to participate in the upside of any potential flight-to-safety trade in government bonds while avoiding the downside associated with the lower yield and higher duration.

Fund performance has outpaced its peers and benchmark since Mr. Wisniewski took the reins a year or so ago. With its defensive positioning, I’d expect it to lag in a bond rally but outperform in volatile periods.

Another interesting feature of this fund is that it is available in a corporate class structure, which makes it more tax friendly for non-registered investors.

The biggest concern I have is the fund’s cost. Its 2.10% MER is well above the category average. I’m not sure I would use this fund as my only fixed-income exposure, but I do see it as possibly playing a role in a well-diversified portfolio. I would expect it to help reduce overall volatility while helping improve returns over the long-term.

Ninepoint Diversified Bond Fund
Fund company: NinePoint Partners LLP
Fund type: Global Fixed Income
FundGrade Rating: C (April)
Style: Top-down/bottom-up
Risk level: Low-Medium
Load status: Optional
RRSP/RRIF suitability: Good
Managers: Mark Wisniewski, Chris Cockeram
MER: 2.10%
Fund code: NPP018 (Front-end load)
Minimum investment: $1,000

Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.

Notes and Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.