A focus on mid-term issues is unlikely to makeBissett Bond Class A a top performer any time soon. But lead manager Guy Le Blanc believes the fund is nonetheless fulfilling its objectives.
"We don't believe we're just managing the portfolio for maximum return. We're also looking at what risks we're willing to take," says Le Blanc, vice-president and director of fixed income with Franklin Templeton Investments Corp.'s Bissett Investment Management in Calgary. While he admits 2005 was difficult for his portfolios, despite being "a good year for bonds" that saw long issues rise 14%, Le Blanc is steadfast about risk parameters.
"Short-term bonds have lower yields and provide lower returns. We're underweight long-term bonds based on the premise that, because they have longer duration, they're more volatile," he says.
The same risk constraints apply to the recently launched Franklin Templeton Managed Yield Class and Franklin Templeton Short Term Yield Class, which use forward contracts to try to match the returns of Bissett Bond andFranklin Templeton Money Market Class A respectively.
"[Franklin Templeton Managed Yield Class] should have the same duration, the same allocations and the same bonds as [Bissett Bond]," says Le Blanc. Thanks to their tax structure, says Le Blanc, the new funds should make for higher after-tax yields by generating income in the form of capital gains rather than interest.
Another recent development affecting Le Blanc's bond funds is the emergence of Maple bonds. Issued by non-Canadian banks and other entities in Canadian dollars, these bonds have gained popularity as a result of last year's elimination of the foreign property restrictions on registered plans.
Currently, Maple bonds make up approximately 6% of Le Blanc's bond portfolios. "We were early in adopting them," he says. "It gives us a chance to diversify into non-Canadian banks and pick up some spread at a wider spread than Canadian issuers."
The Quebec-born Le Blanc started working in the investment industry when he joined National Bank of Canada's back-office operations after completing a bachelor of business administration degree at Université du Québec à Montréal in 1990. Later, he worked as an international bank credit analyst, then as a foreign exchange trader and money market trader with the firm.
When a career opportunity for his wife prompted the couple's move to Calgary in 1997, it marked just one of several momentous events for Le Blanc that year. "I wrote my [CFA] exam one weekend, got married the next weekend, and moved right after that," the 40-year-old Le Blanc recalls.
An avid player and national referee of water polo who currently serves as the treasurer of the Alberta Water Polo Association, Le Blanc was also attracted to his new home by an excellent provincial program in the sport and the city's role as home to the national team.
Shortly after moving to Calgary, Le Blanc joined then-independent Bissett & Associates Investment Management. Working as a money market trader under the tutelage of veteran Bissett portfolio manager and chief investment officer Mike Quinn, who retired last year, Le Blanc assumed the lead management role for Bissett Bond in 2000. The start of his tenure coincided with the acquisition of Bissett by Franklin Templeton Investments.
Now, Le Blanc heads a five-person roster that includes fixed-income portfolio managers Heather McOuatt, who focuses on credit analysis, and Darcy Briggs, who concentrates on economic analysis. Together with bond trader Brian Calder and money market trader Jeffrey Johnson, the three managers meet early each morning to update fellow team members on their respective specialties.
Longer weekly discussions of economic outlook and investment selection supplement those meetings, and an additional layer of input comes from a company-wide fixed-income subcommittee, says Le Blanc. In all, he is responsible for more than $5 billion in assets.
Along with managing duration, Le Blanc overweights corporate issues, a strategy that represents an extension of the company's equity bias, according to Le Blanc. Currently, Bissett Bond holds 39% in corporates, compared with approximately 28% for the index.
Triple-B issues, which may go as high as 15% in the portfolio, currently make up 7% of the fund. "At the moment, some triple-B names are interesting but overall they're pretty tight," says Le Blanc. "We're patient; we're willing to wait for the spread to widen before we jump in and buy more."
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