Ready to launch when rates rise

Preferred share manager Roger Rouleau has dry powder to deploy at 1832 Asset Management

Michael Ryval 9 January, 2020 | 1:58AM

Hot air balloon

While equities and fixed income performed well in 2019, the Canadian preferred share markets generated only modest gains. Yet Roger Rouleau, a Montreal-based preferred share portfolio manager and vice-president at 1832 Asset Management LP sees gains on the horizon as enticing values emerge in the asset class.

“There are three main drivers for the Canadian preferred share market, two of them are fundamental and one is technical,” says Rouleau, co-manager of the 4-star rated $840.6 million Dynamic Preferred Yield Class. “The two fundamental drivers are investor appetite for credit risk and interest rates. When you are buying a preferred share you are extending credit to the issuer and taking on credit risk. This means investor sentiment towards credit is one of the asset class’s big drivers.”

Investment-grade corporate bonds have done quite well in 2019, Rouleau notes. “But there is a pretty big gap between where the preferred share market has traded and where you would expect it to be based on credit instruments.” This is where the second factor, interest rates, comes in.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Dynamic Preferred Yield Class Series F7.38 CAD-0.75
Enbridge Inc39.97 CAD0.00
Pembina Pipeline Corp22.25 USD0.00

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Michael Ryval  

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