Fund in Focus: CI Investment Grade Bond Fund

Controlling volatility for above-average risk-adjusted returns

Managed by Paul Sandhu of Marret Asset Management, the CI Investment Grade Bond Fund is a global fund that can invest in Canadian, U.S., and European corporate bonds. Mr. Sandhu builds a core portfolio using a combination of top-down macro analysis combined with fundamental, bottom-up security selection.

Once the portfolio is set, he then uses an overlay strategy to tactically hedge interest rate, credit, and currency risks. In addition, he will actively trade the portfolio, looking to take advantage of short-term opportunities. At the end of February, the fund held 41% of assets in Canadian corporate bonds, 19% in foreign credit, 18% in Canadian government bonds, 10% in foreign government bonds, with the remainder in cash. Geographically, 69% of assets are in Canada, and just shy of 31% in the U.S.

While the $850 million portfolio is diversified, with about 200 individual bond positions, credit quality remains high, with an average credit rating of A. The managers are very active in managing the duration exposure, and at the end of February, the duration was 8.8 years, compared with 6.2 years for the category average.

Recent performance has been better than average, with a year to date return of 3.2% to Feb. 29, compared with the category average of 1.8%. Over the longer term, the fund posted a 3-year average annual compounded rate of return of 3.4% to Feb. 29, compared with the category average of 2.3%. And with a 3-year average standard deviation of 2.98, volatility has been below the peer group, resulting in above-average risk-adjusted returns.

Costs are reasonable with an MER of 1.59%, compared with 1.74% for the average of the global bond funds I follow.

With its fundamental security selection, active duration strategy, and focus on risk management, this fund is worth considering for a portion of the fixed-income sleeve of your portfolio. Bear in mind that there may be times when the managers don’t get their high conviction calls exactly right, which could result in periods where they lag the broader market and peer group.

If you prefer an ETF structure, a substantially similar mandate is available in the First Asset Investment Grade Bond ETF (TSX: FIG).

CI Investment Grade Bond Fund
Fund company: CI Investments
Fund type: Global Fixed Income
FundGrade Rating: C (February)
FundGrade A+® Award: 2017
Style: Active
Risk level: Low
Load status: Optional
RRSP/RRIF suitability: Good
Manager: Paul Sandhu since Dec. 2014
MER: 1.59%
Fund code: CIG2185 (Front-end load)
Minimum investment: $500

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.