One of the big reasons is that the manager can invest not only in
traditional short-term bonds, but also in floating-rate securities and
convertible bonds. The fund has a go-anywhere mandate, but as of the end of
May, more than 90% of the portfolio was invested in Canada.
The fund also has flexibility around credit quality, and can invest up to
40% in non-investment grade issuers. And at the end of May, nearly 10% was
in fact allocated to non-investment grade debt.
Canso’s 28-member investment team gives it the bench strength for an
in-depth fundamental review to understand a company’s cash flow picture, to
assess creditworthiness, and covenants, to understand their rights should
things go south. An internal credit rating system and maximum loss score
sets up a worst-case scenario.
The managers are active in their approach, and will manage credit quality
based on the risks of the market. The result is a concentrated portfolio,
with the fund holding 60 securities. The top 10 holdings make up roughly
half of the portfolio. In the expectation of higher yields, the fund is
defensively positioned, with half of the portfolio invested in
This positioning has benefitted the fund. In April, the FTSE/TMX Short Term
Bond Index was down 0.07%, the fund was up 0.09%. Year to date, the index
was up 0.11%, while the fund gained 0.25%. For the 12 months ending in
April, the fund returned 0.51% to the end of April, compared with a loss of
0.83% for the index.
Looking ahead, given the bench-strength of the management team and the
active investment process they use, I would expect this fund to be able to
outpace most of its peers on both an absolute and risk-adjusted basis.
However, given its focus on corporate debt over government issues, it may
be a touch more volatile than its peers over short-term periods.
Lysander-Canso Short Term & Floating Rate Fund
Lysander Funds Ltd.
Canadian Short-Term Fixed Income
Bottom-up Credit Analysis
John Carswell since Sept 2013
Source: Fundata Fund Profiler,
as of April 30, 2018
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
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.
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