Salman Ahmed: We recently did a video discussing two of our favourite global bond funds. In this segment, we're going to discuss two of our favourite Canadian fixed income funds: PH&N Bond and Beutel Goodman Income. Both are rated Gold, which is the highest rating that we can give any fund. That means these funds have the highest conviction, and our analyst team believes that there is a high likelihood of them outperforming their benchmark or peers. Both of them have similarities. There is also a few key differences.
So, why don't we start with Beutel Goodman, Vishal? You're the lead analyst on it. What sets Beutel Goodman Income apart from other Canadian fixed income strategies?
Vishal Mansukhani: So, the portfolio managers of the Beutel Goodman Income Fund use many levers to run this fund. Their macroeconomic outlook dictates the fund's duration positioning and the yield curve positioning. Also, Beutel Goodman, as a shop, they're company experts. So, their credit selection has also been a great source of value-add in the past.
Ahmed: And that's a little bit different from PH&N. We found their strength to be really on some of their proprietary systems. So, while other Canadian fixed income managers have cited the non-availability of a strong attribution system and risk management system focused on the Canadian universe, PH&N went out and built it themselves, and that's really set them apart.
I mean, if you go back to 2008, some of their portfolios held U.S. financials, which weren't doing so well, but their proprietary risk management systems allowed them to position those securities so that they didn't have an outsized impact on the portfolio, and their long-term results definitely reflect strong prudent risk management.
Mansukhani: Yes, that's a big difference between the two funds because Beutel Goodman does not have the same level of sophistication in their risk-management tools and in the technological resources allocated toward managing this fund. However, they do have some portfolio constraints that can lower their exposure to certain risks. For example, they cannot have more than 50% of the fund invested in corporate bonds, and they do not invest in bonds that are rated below BBB.
Ahmed: Yes. A similarity between the two funds is their highly tenured teams. I mean the Beutel Goodman Fixed Income team has been managing the fund for really a long time.
Mansukhani: So, the Beutel Goodman Income has had excellent management continuity. Bruce Corneil and David Gregoris have been running this strategy for 20 years now. Before that Bruce Corneil was a bond manager at Manulife for another 20 years. So, he's a very tenured bond manager. After his retirement, David Gregoris is going to take over the fund. This tenure is a big advantage for investors because these managers have navigated this fund through bad times historically and that just builds conviction that they will do so going forward.
Ahmed: And PH&N, there the tenure isn't as long as some of the Beutel Goodman managers, but it's also very seasoned investment team. Though technically William John is listed as the portfolio manager, he is not the sole decision-maker. They have got a broad cast of credit analysts, high-yield analysts, risk teams and an investment-grade team too to help navigate the fund through these different levers that they play on.
Another similarity is their fees. They are both offered both in the advisor channel and to do-it-yourself investors. Now, where the fees rank is a little bit different though.
Mansukhani: So in terms of the fund offered in the advisor channel, it's very competitively priced, a lot below the median for the category. However on the DIY channel, the fees rank in the middle of the pack.
Ahmed: PH&N Bond is very attractively priced in both the advisor and the do-it-yourself channel. The advisor channel, like Beutel Goodman, is very competitively priced, but in the DIY channel it's among the cheapest if not the cheapest fund available.
So at the end you have two historically really strong performing funds with good teams and processes that are maybe a little different, but each has merits to it.
For more information on these two funds or other investing topics, please visit our website regularly at www.morningstar.ca.
