Fixed Income: Why choose active management? Why Active Management?

Fixed Income: Why choose active management?
Why Active Management?
You may use a bond laddering strategy in your practice today. A laddering strategy is suitable for conservative
portfolios where a predictable stream of income is required. In employing a static laddered approach, investors
avoid interest rate risk, but they are missing out on the opportunity to take advantage of shifting yield curve and
credit environments. By using an active approach, a fixed income manager can employ a number of strategies and
use a variety of different instruments – including high yield bonds, provincial bonds and corporate bond issues – to
generate lower risk and achieve higher yields.
This type of investing requires the expertise and resources of a skilled bond manager that is able to
make nimble portfolio adjustments and identify opportunities in constantly changing markets. Phillips,
Hager & North’s fixed income desk focuses on “adding value while controlling risk.” This gives your
clients the opportunity to enhance yield and portfolio diversification while benefiting from the
conservative approach that is PH&N’s hallmark, and which has served institutions and investors for over
two decades.
Benefits of active management
An actively managed bond fund can offer your clients n Sound credit oversight: Ability to look beyond the
reports of Wall Street analysts and perform original
the opportunity to benefit from additional yield and
credit research on issuers.
diversification with lower risk. An actively managed
bond portfolio offers the following benefits:
n Automatic re-investment of interest and principal:
Clients benefit from the power of compounding.
n Gain access to bond issues with high barriers
to entry: Corporate bond and high-yield issuances n Exposure to a wider range of bond strategies:
often have investment minimums of over $10,000.
Enhanced flexibility and return potential through
PH&N manages over $15 billion in corporate
exposure to strategies including convertible bonds,
bonds, allowing investors to benefit from improved
foreign-pay bonds, convergence trades, curve
information flow, economies of scale and outstanding
steepeners and butterfly trades.
dealer relationships.
n Nimble response to changing market conditions:
n Professional management: The resources of a
Ability to capitalize on market inefficiencies.
dedicated bond team. For example, the PH&N fixed
income desk comprises 28 investment professionals n Ease of tax reporting: Less onerous tax reporting and
administration relative to laddered portfolios.
fully dedicated to the research, analysis, trading and
risk management of fixed income assets.
n Detailed reporting: Detailed quarterly commentary
and reporting helps you to save time so you can focus
n Enhanced diversification: Exposure to a wider
on servicing your clients.
variety of bonds provides diversification by
geography, industry, maturity, duration and yield.
n Active
risk management: Risk management
figures prominently in actively managed bond
portfolios and allows clients to assume lower
risk for the same return potential. Or conversely,
gain higher return potential for the same level
of risk.
PH&N: A proven fixed income leader
Winner “Best Bond Fund Family” two years in a row
– Lipper
Phillips, Hager & North has been managing assets for
institutions, pension plans and individual investors for
over forty years. The firm is widely recognized as one
of Canada’s leading fixed income managers.
PH&N uses a diverse toolkit to help you manage
risk within a clients’ fixed income portfolio. Their
conservative approach to risk management has been
sought after by the “smart money” since 1967. Now,
you can draw on this same trusted expertise to achieve
diversification and enhance clients’ risk/return profiles.
Two excellent choices to diversify your clients’ fixed income portfolios:
PH&N Total Return Bond Fund
The Total Return Bond Fund is an excellent core bond
holding for almost all investors with an allocation to
fixed income.
The Fund is ranked in the 12th percentile among its peer
group over five years ended September 30, 2008.*
• Winner of “Canadian Fixed Income Fund” for the past
two years – Canadian Investment Awards.
PH&N High Yield Bond Fund
The High Yield Bond Fund is at the conservative
end of the range for high yield funds, with excellent
competitive performance. It is suitable for investors
who are looking for yield pick-up within their bond
portfolios. The fund is ranked in the 1st percentile
among its peer group over the five years ended
September 30, 2008, and has the highest Sharpe Ratio
out of 40 funds for the same time period.*
*Source: Morningstar.
Fund codes and compensation
PH&N Fund Name
Fund Code
Series C Series F
PH&N Total Return Bond Fund PH&N High Yield Bond Fund PHN 3340
PHN 3280
PHN 5340
PHN 5280
Management Fee
Series C Series F
1.00%
1.25%
0.50%
0.75%
Trailing Commission
Series C Series F
0.50%
0.50%
n/a
n/a
PH&N and RBC Asset Management – working together to offer you and your clients value, choice and transparency.
Talk to your RBC Asset Management Regional Sales Team at 1-888-770-2586 for more information.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are
not guaranteed or insured, and their values change frequently. Performance data shown assumes reinvestment of distributions only and does not take into account sales, redemption,
distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Past performance may not be repeated. The Lipper Fund Awards were awarded
based on the best risk-adjusted performance over the 3-year periods ending December 31, 2006 and 2007. Lipper Inc. is a Reuters company. Phillips, Hager & North Investment Management
Ltd. (PH&N IM) and Phillips, Hager & North Investment Funds Ltd. (PH&N IF) are the principal portfolio adviser and principal distributor, respectively, for all PH&N funds. PH&N IM and
PH&N IF are both wholly-owned subsidiaries of the Royal Bank of Canada. Annualized rates of return for periods ending September 30, 2008: Total Return Bond Fund: 1-year = 1.7%;
3-year = 2.3%; 5-year = 4.1%; and since inception (July 2000) = 5.8%; High Yield Bond Fund: 1-year = 1.4%; 3-year = 4.0%; 5-year = 5.9%; and since inception (July 2000) = 7.5%;
DEX Universe Bond Index: 1-year = 4.6%; 3-year = 3.4%; 5-year = 4.8%.
60054 (10-2008)