September 12, 2024
Flexibility in Fixed Income: The Case for Active, Unconstrained Investing
In the ever-evolving landscape of fixed income investing, a dynamic and adaptive approach can make all the difference. For example, consider CI Global Unconstrained Bond Fund (formerly CI Global Unconstrained Private Pool). Unlike traditional fixed income funds bound by narrower mandates, this unconstrained strategy benefits from enhanced flexibility to navigate market fluctuations and help capitalize on emerging opportunities. It’s a “set it and forget it” solution where tactical, active shifts in portfolio compositions are managed by CI Global Asset Management’s (CI GAM) award-winning fixed income portfolio management team.
| Target Credit Quality | No restrictions and no minimum average credit quality |
|---|---|
| Duraion Range | No restrictions |
The Backstory
Initially launched in October 2018 as a private pool, the fund posted repeatedly stellar relative performance, yet it did not attract assets as one might expect, given that the minimum investment was initially set at $100,000. On July 16, 2024, the solution was relaunched as a retail mutual fund with a $500 minimum investment, and also as an exchange-traded fund (ETF), thereby facilitating greater investor access.
Management Style and Opportunity Set
CI Global Unconstrained Bond Fund, now available as both a mutual fund and ETF, benefits from an “all hands on deck” approach. The entire 16-person fixed income investment team at CI GAM contributes to the strategy. At the heart of this strategy is active management. Talented portfolio managers bring their expertise and insights to bear, allowing for timely adjustments as the opportunity arises. Whether it’s identifying undervalued securities, anticipating macroeconomic shifts or managing interest rate exposure, active management is pivotal in 2024 and beyond. We believe it will take the specialized skills of active managers with sector specialties to generate superior relative returns from here. Moreover, as interest rates fall and reinvestment risk becomes a concern for holders of GICs and HISAs, it’s important not to let a trade capitalizing on elevated short-term rates become an investment thesis. Rotating into CI Global Unconstrained Bond Fund would allow investors to gain exposure to longer duration, adding positive price sensitivity in an environment of declining interest rates.
The true cornerstone of this strategy is its flexibility. The fund can easily pivot and adjust its asset allocation, security selection and duration management, while also benefiting from the stewardship of CI GAM’s best-in-class fixed income team. This adaptability is crucial when responding to changing market conditions. As the Bank of Canada, European Central Bank and the Bank of England began their rate-cutting cycles, and as the U.S. Federal Reserve Board is expected to join in September, yield curves across most developed markets are steepening and expected to continue doing so. The fund has extended its duration over the past 18 months, from roughly 2 years at the start of 2023 to approximately 5.5 years today, to help better position exposure within the fund to benefit from falling yields.
Credit spreads for both investment-grade and high-yield bonds remain narrow but are largely still attractive on an all-in yield basis. To date in 2024, supply has been elevated but well absorbed in the market, an indication that a strong appetite continues for such securities, and is able to support recent valuations. We believe that credit will remain an attractive segment for sector specialists who can effectively identify value. In high yield, we’ve seen that transpire in our ability to identify and avoid losers – which at times is more important than picking the winners. More recently, the portfolio management team has been gradually reducing high-yield exposure in favour of investment-grade credit and government issues, as they are expected to be better positioned to withstand significant economic volatility, if it should arise. This agility allows for more proactive management, tailoring the portfolio to prevailing economic environments.
Active Diversification: Beyond the Ordinary
Diversification is a critical element of risk management in any investment strategy. CI Global Unconstrained Bond Fund not only diversifies across different credit qualities and durations, but also across geographies and sectors. This broad diversification can help mitigate the impact of localized risks and enhance the potential for more-stable overall returns. This diversification strategy has worked well to date, with the fund receiving a 5-Star Morningstar rating and a FundGrade A+ rating for 2023.
If you’re seeking a flexible fixed income strategy that’s well diversified, can take advantage of prevailing market conditions and is actively managed by a strong investment team, consider CI Global Unconstrained Bond Fund for your portfolio.
About the Author
Michal Brosh is Vice-President, Institutional Portfolio Manager – Fixed Income in CI GAM’s Investment Advisory Group. She joined CI GAM in March 2024. She has 15 years of macro-focused industry experience, having worked at RBC Capital Markets, where she was a US dollar repo trader before joining CI GAM. Michal is a CFA charterholder.
IMPORTANT DISCLAIMERS
Commissions, trailing commissions, management fees and expenses all may be associated with an investment in mutual funds and exchange-traded funds (ETFs). Please read the prospectus before investing. Important information about mutual funds and ETFs is contained in their respective prospectus. Mutual funds and ETFs are not guaranteed; their values change frequently, and past performance may not be repeated. You will usually pay brokerage fees to your dealer if you purchase or sell units of an ETF on recognized Canadian exchanges. If the units are purchased or sold on these Canadian exchanges, investors may pay more than the current net asset value when buying units of the ETF and may receive less than the current net asset value when selling them.This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies.
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what CI Global Asset Management and the portfolio manager believe to be reasonable assumptions, neither CI Global Asset Management nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
®2024 Morningstar is a registered trademark of Morningstar Research Inc. All rights reserved. © 2024 Morningstar Research, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
CI Global Unconstrained Bond Fund, Series F was rated against the following numbers of Multi-Sector Fixed Income funds over the following time periods: 259 funds in the past three years and 223 funds in the past five years. Past performance is no guarantee of future results.
Morningstar Rating is for the F share class only; other classes may have different performance characteristics. Morningstar Ratings reflect performance as at July 31, 2024 and are subject to change monthly. The ratings are calculated from a fund’s 3, 5 and 10-year returns measured against 91-day Treasury bill and peer group returns. For each time period the top 10% of the funds in a category get five stars. The Overall Rating is a weighted combination of the 3, 5 and 10-year ratings. For greater detail see www.morningstar.ca.
CI Global Unconstrained Bond Fund, Series F has received a FundGrade A+® Award for the year 2023 in the CIFSC Multi-Sector Fixed Income category. The FundGrade A+® Award for the Fund is calculated from January 1 to December 31, 2023. CI Global Unconstrained Bond Private Pool, Series F’s performance and the number of funds in the CIFSC category for the period ended December 31, 2023, is as follows: 1 year: 8.5% (259 funds); 3 year: 2.2% (240 funds); 5 year: 3.6% (213 funds).
FundGrade A+® is used with permission from Fundata Canada Inc., all rights reserved. The annual FundGrade A+® Awards are presented by Fundata Canada Inc. to recognize the “best of the best” among Canadian investment funds. The FundGrade A+® calculation is supplemental to the monthly FundGrade ratings and is calculated at the end of each calendar year. The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade. To be eligible, a fund must have received a FundGrade rating every month in the previous year. The FundGrade A+® uses a GPA-style calculation, where each monthly FundGrade from “A” to “E” receives a score from 4 to 0, respectively. A fund’s average score for the year determines its GPA. Any fund with a GPA of 3.5 or greater is awarded a FundGrade A+® Award. For more information, see www.FundGradeAwards.com. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata.
The FundGrade A+® rating is used with permission from Fundata Canada Inc., all rights reserved. Fundata is a leading provider of market and investment funds data to the Canadian financial services industry and business media. The Fund-Grade A+® rating identifies funds that have consistently demonstrated the best risk-adjusted returns throughout an entire calendar year. For more information on the rating system, please visit https://www.fundata.com/fundgrade.
The CI Exchange-Traded Funds (ETFs) are managed by CI Global Asset Management, a wholly-owned subsidiary of CI Financial Corp. (TSX: CIX).
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