A worthy consideration for core fixed income exposure

Leith Wheeler Core Bond's returns have beaten the average fund in the Canadian Fixed Income category.

Shehryar Khan, CFA 2 January, 2018 | 6:00PM
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Leith Wheeler's CEO and head of fixed income Jim Gilliland took over Leith Wheeler Core Bond in 2009 and since then has refined the investment process, built out the team, and improved the risk-management capabilities. These moves put the odds of long-term success in the team's favour and thus far have produced strong performance relative to peers in the Canadian Fixed Income category. This fund, which invests primarily in investment-grade and government bonds, is a worthy consideration for a core domestic bond holding and provides valuable diversification from equities, according to research performed by Morningstar Investment Management LLC.

Gilliland has a team of seven people contributing to this fund. Given his substantial firm-level responsibilities, it's encouraging that he's backed by a growing, if still partly new cast. Eric Lam, for example, oversees the portfolio on a day-to-day basis in addition to his credit research responsibilities.

Leith Wheeler's value-driven investment philosophy shines through in its fixed-income approach. The team's process starts with the development of 12-month and three-year interest rate forecasts. This dual time horizon helps the team identify sectors and parts of the yield curve that might be undervalued. It is also an effective form of risk management that helps the team size its interest rate calls, which are harder to get right in the long run on a consistent basis. For instance, despite their longer-term view that interest rates are likely to increase, they are more cautious on the Canadian economy in the short term.

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About Author

Shehryar Khan, CFA

Shehryar Khan, CFA  Shehryar Khan, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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