In today’s low yield environment, investors need a new approach to generate a reasonable return from fixed income and manage the associated risks and market volatility. At RPIA, we utilize an expanded toolkit that allows us to access opportunities generally unavailable to the traditional fixed income investor. Capturing these additional sources of potential return and managing risk effectively are key drivers for our strategies.
Ability to look outside of Canada and analyze relative value on global terms. The Canadian corporate bond market is small in global terms – about 3% of the global market - with a limited opportunity set for active managers to add value. Our strategies give us the ability to invest in global bonds – but with the tools to hedge currency risk. As such, we are able to benefit from a much wider opportunity set.
Flexibility to invest both long and short to manage risk and pursue returns in all markets. If used appropriately, we believe that short selling can be a very useful tool for investors. It can reduce or hedge exposure to interest rates or credit risk. We use the ability to short in certain strategies in order to manage risk as we aim to provide our investors with a smoother return profile.
Flexibility beyond the constraints of an index. Most fixed income investors are focused only on the securities included in an index at any given point in time. We find there is often better relative value to be found by looking beyond the index and having the flexibility to invest in a broader range of securities. We believe that we can find and invest in the cheapest securities on a relative value basis, with the aim of capturing additional return for our investors.
Flexibility to invest along different parts of the capital structure of companies. Corporations issue many different types of bonds with different terms and seniority. We continually assess the relative value of individual securities to find attractive investment opportunities. The flexibility to invest across an issuer’s capital structure enables our portfolio management team to select the securities that offer what we view as the best risk-reward proposition at any given point in time. As value is always shifting, the flexibility to adjust our exposure is critical.