Wednesday November 12th, 2014
The Fund tactically allocates across the credit spectrum including high yield, investment grade, government bonds, and cash. The Fund was positive in October as high yield bonds bounced back higher from the previous month. Gains were also seen across investment grade corporate bonds.
The current portfolio is positioned to benefit from increasing demand for corporate debt, with a tilt towards high yield over investment grade debt.
The Fund decreased its allocation to high yield from 60% to 46%, increased its allocation to investment grade credit from 37% to 49% and increased its government bond exposure from 1% to 3%. The Fund maintained a cash position of approximately 2%.
October was a bit of a roller coaster ride as markets sold off heavily in the first half of the month before bouncing back rapidly in the second half. Stock markets were initially dragged lower on fears of global slowdown as the IMF cut the global growth outlook while poor European economic data pointed towards a shaky recovery. Cyclical commodity sectors were hit hardest with energy and materials leading the sell-off. However, momentum shifted mid-month as the beginning of the ECB’s bond buying stimulus program combined with dovish Fed comments seemed to turn around the negative sentiment. Expectations of solid U.S. corporate earnings coupled with a strong GDP print helped drive a rebound in stocks. To close out the month, the Bank of Japan unexpectedly boosted its own stimulus measures accelerating purchases of bonds and domestic stocks, which gave a further lift to global markets.
This month commodities performance was mixed. The energy complex continued to see downward pressure from supply overhang. Gold broke lower as safe haven trades were exited and the dollar rallied. Grains bucked the trend and saw a squeeze higher on concerns that poor weather would negatively affect the harvest.
The U.S. dollar saw some initial weakness in October before rallying back later to close out the month strong. The loonie ended slightly weaker versus the dollar at 1.1260.