Fund in Focus: CI Investment Grade Bond Fund

FundGrade A+® Award winner

The investing environment is getting considerably more challenging, as interest rates are likely to be moving higher in Canada and the U.S., and likely around the globe. Passive, low-cost, index-like bond investments have done well over the past few years, but now it will be the time for truly active bond strategies to shine. And the FundGrade A+® Award-winning CI Investment Grade Bond Fund is one such strategy.

Managed by Paul Sandhu of Marret Asset Management, this is a global bond fund that affords the managers a lot of flexibility. With its global mandate, the fund 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 three key risks: interest rate risk; credit risk; and currency risk.

To hedge interest rate risk, the Mr. Sandhu can tactically short government bonds and interest rate futures, while credit risk is hedged through the use of credit default indexes.

In addition, he will actively trade the portfolio, looking to take advantage of short-term opportunities.

At the end of December, the fund held 47% of assets in Canadian corporate bonds, 19% in foreign credit, 16% in foreign government bonds, 9% in Canadian government bonds, and the remainder in cash.

Performance has been very strong. The 3-year average annual compounded rate of return ending Oct. 31 was 2.1% compared with the FTSE/TMX Canada Universe Bond Index return of 1.5%.

At an 3-year average standard deviation of 2.6%, Volatility has been well below the index and the peer group, resulting in above-average risk adjusted returns.

With credit spreads tight around the world, and interest rates becoming increasingly volatile, you need a bond fund that is actively managed. The CI Investment Grade Bond Fund is certainly one worth taking a look at.

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
FundGrade A+ Award: 2017
Style: Top-down macro/Bottom-up security selection
Risk level: Low
Load status: Optional
RRSP/RRIF suitability: Good
Manager: Paul Sandhu since Dec. 2014
MER: 1.68%
Fund code: CIG2185 (Front-end load)
Minimum investment: $500

Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due diligence on a variety of investment products. He is also the publisher of Dave Paterson’s Top Funds Report, offering regular commentary and in-depth analysis of Canada’s top investment funds. He uses a unique analytical approach to identify funds with strong, risk-adjusted returns, and regularly publishes his insights and analyses in Fund Library.

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.