Why Generation for Investment Grade Income
A purely Canadian, factor-driven approach to building diversified investment grade portfolios.
Within a portfolio, investors can rely on their allocation to investment grade bonds for consistent income with historically low default rates. With over 25 years of experience navigating fixed income markets, Generation is your trusted partner for constructing diversified investment grade portfolios.
Purely Canadian Investment Grade
Most investment grade funds do not invest exclusively in Canadian investment grade bonds. In fact, our 2023 review of FundLibrary’s Canadian Corporate Fixed Income category revealed that the average fund had approximately 85% invested in Canadian corporate bonds, with the remainder a mix of mortgages, international bonds, government bonds, and cash.
Our Investment Grade Income Model invests exclusively in Canadian investment grade bonds, making the model an ideal solution for Canadians seeking reliable income from our country’s leading businesses.
Better Diversification
Canadian banks, insurers, utilities, REITs, and the major communications companies make up the bulk of investment grade bond issues. Canada does not have depth in technology, health care, or consumer products to make these sectors a major part of the investment grade bond landscape. Moreover, there are typically a handful of large players in each major sector. Consequently, many Canadian investment grade bond strategies tend to be concentrated in the same sectors and companies.
Our Investment Grade Income Model places a 3% notional limit per security and our industry weighting is notionally limited to 25%. These guidelines provide greater security and sector diversification.
A 3% notional limit per security — and a 25% cap per industry — engineered for diversification.
Canadian Innovation
Our process utilizes a factor approach to investment grade bonds. While popular in the United States, few Canadian managers utilize a systematic approach for investment grade security selection.
Crafting our investment process was a significant undertaking. Investment grade bonds present an interesting challenge: there are thousands of bonds but liquidity is sporadic. The end solution melded our systematic tools with old school, over-the-counter trading.
Active Duration Management
Duration measures how long it will take for an investor to be repaid the bond’s price from the interest payments received from the bond. It also serves as a measure of how sensitive a bond’s price will be to changes in interest rates.
When we expect interest rates to rise, portfolio duration is lowered to temper the impact of rising rates. Conversely, duration is extended when interest rate cuts are expected, maximizing the benefit from anticipated appreciation of bond prices.
Building an Income Portfolio
Utilizing a value approach, we identify undervalued REITs, infrastructure firms, and high dividend-paying equities that offer both the potential for steady income and capital appreciation.
We seek high-yield bonds and preferred shares from North American businesses that our analysis indicates are fundamentally mispriced.
We invest in dominant Canadian businesses with solid balance sheets based on our proprietary systematic model.
Earn interest with money market funds, high-interest ETFs, and/or GICs.
DISCLAIMER
The information contained herein is for informational and reference purposes only and shall not be construed to constitute any form of investment advice. Nothing contained herein shall constitute an offer, solicitation, recommendation or endorsement to buy or sell any security or other financial instrument. Investment accounts and funds managed by Generation PMCA Corp. may or may not continue to hold any of the securities mentioned. Generation PMCA Corp., its affiliates and/or their respective officers, directors, employees or shareholders may from time to time acquire, hold or sell securities mentioned.
The information contained herein may change at any time and we have no obligation to update the information contained herein and may make investment decisions that are inconsistent with the views expressed in this presentation. It should not be assumed that any of the securities transactions or holdings mentioned were or will prove to be profitable, or that the investment decisions we make in the future will be profitable or will equal the investment performance of the securities mentioned. Past performance is no guarantee of future results and future returns are not guaranteed.
The information contained herein does not take into consideration the investment objectives, financial situation or specific needs of any particular person. Generation PMCA Corp. has not taken any steps to ensure that any securities or investment strategies mentioned are suitable for any particular investor. The information contained herein must not be used, or relied upon, for the purposes of any investment decisions, in substitution for the exercise of independent judgment. The information contained herein has been drawn from sources which we believe to be reliable; however, its accuracy or completeness is not guaranteed. We make no representation or warranties as to the accuracy, completeness or timeliness of the information, text, graphics or other items contained herein. We expressly disclaim all liability for errors or omissions in, or the misuse or misinterpretation of, any information contained herein.
All products and services provided by Generation PMCA Corp. are subject to the respective agreements and applicable terms governing their use. The investment products and services referred to herein are only available to investors in certain jurisdictions where they may be legally offered and to certain investors who are qualified according to the laws of the applicable jurisdiction. Nothing herein shall constitute an offer or solicitation to anyone in any jurisdiction where such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such a solicitation.