The Turning Tides of Fixed Income
2022 was a historic year for fixed income investors. A year highlighted by the war in Ukraine, global supply chain disruptions, surging inflation pressures and central banks in North America responding with one of the fastest interest rate hiking cycles on record which sparked one of the worst performing periods in history for the asset class.
However, with yields sitting at their highest levels in over a decade, fixed income is back to doing what it’s supposed to do for investors – generate income, preserve capital and stabilize overall portfolio volatility.
AGF offers a full suite of fixed income solutions for a wide range of investor needs – including core, income, and global diversification. Explore our top Morningstar-rated (series F)1 and award-winning funds:
Overall Morningstar Rating
A core "plus" strategy utilizing alternative fixed-income asset classes to provide greater diversification and higher potential yields.
View Fund- 2022 FundGrade A+ Award Winner2
Overall Morningstar Rating
A complement to core bond holdings or used as a hedge against rising interest rates.
- 2022 FundGrade A+ Award Winner2
Overall Morningstar Rating
A 'go-anywhere' fund that focuses on the most attractive fixed income opportunities from issuers around the world.
View FundOverall Morningstar Rating
A strategic and tactical allocation to emerging markets fixed income securities with a currency overlay to reduce risk.
Taking an Active Approach to Fixed Income
With bonds now providing a more competitive yield and better potential for downside protection, here are a few important considerations as you reevaluate fixed income for your clients’ portfolios.
The Return of the 60/40
A more balanced approach between equities and bonds is going to be important going forward. The 40% in a traditional 60/40 balanced portfolio not only continues to be a diversifier and cushion against volatility within equities, but now offers the potential for higher returns as well.
When looking at the U.S. market, the average annual return of the 60/40 over the past 4 decades has been 10.2%, only lagging US equities by 2.4% with reduced volatility.
Source: Morningstar Direct as of December 31, 2022. US equities represented by the S&P 500 Index (US$) and the 60/40 Portfolio by a blend of 60% S&P 500 Index (US$) and 40% Bloomberg US Aggregate Bond Index (US$). One cannot invest directly in an index. Hypothetical performance is not necessarily indicative of future results.
With the rise in U.S. treasuries, AGF Total Return Bond Fund has maintained a higher allocation to U.S. fixed income securities relative to peers, offering potential for higher returns and flexibility to overweight/underweight fixed income securities globally based on where the team finds opportunities.
The Return of Income
The very factor that precipitated challenging returns (rising rates) has also led to more attractive yields for bonds. With the return of a more competitive income environment, various bond asset classes, including government and investment grade, can now provide investors with much higher distribution potential, raising the bar for other yield-oriented securities such as dividend stocks and GICs.
| “We’ve had a regime change in markets. Investors needed to chase yield and accept a much higher volatility to achieve their long-term objectives over the past decade. But with the significant re-pricing of real interest rates, that is no longer necessary. Income is the most certain element of a return profile and, when you have enough of it, there should be less need for excessive risk taking.” – AGF Fixed Income Team |
For yield enhancement, AGF Global Corporate Bond Fund employs an array of opportunistic high yield instruments including preferreds, loans and emerging markets bonds, in addition to investment grade corporate and government bonds which act as anchors of the strategy.
Diversifying Fixed Income Assets
Focusing on domestic bonds can be a good strategy for certain investors. However, core fixed income portfolios – particularly those with allocations to longer-term bonds only – have longer duration exposure and higher interest rate sensitivity. The inclusion of non-core fixed income classes such as convertible bonds and high yield bonds can diversify portfolios by providing differentiated sources of risk and return, different levels of duration risk and exposure to various interest rate regimes.
Source: Morningstar Direct. Period: 3/1/2013 – 2/28/2023. Canadian Investment Grade Bonds represented by the Bloomberg Canada Aggregate Bond Index (C$), Global Investment Grade Bonds by the Bloomberg Global Aggregate Bond Index (C$), Emerging Markets Bonds by the JPM EMBI Global Core Index (C$), Global High Yield Bonds by the Bloomberg Global High Yield Index (C$), Convertible Bonds by the Bloomberg US CnvtblsCsh Py>$250mn Index (C$) and Loans by the Bloomberg USFRN 5-Yr Index (C$). One cannot invest directly in an index. Past performance is not indicative of future results.
Navigating security selection within the global fixed income market can be complex. Consider strategies such as AGF Global Convertible Bond Fund and AGF Emerging Markets Bond Fund which can efficiently complement existing core holdings through targeted exposure to specialized fixed income segments.
Why AGF for Fixed Income
AGF’s Fixed Income Team was initially formed by our founder Warren Goldring when establishing our firm in 1957. Before starting AGF, Warren Goldring worked as an analyst specializing in bond and fixed-income investing, later taking an active role in shaping AGF’s approach to the asset class.
In today’s complex fixed income market, AGF’s Fixed Income Team leverages their long-tenured expertise in core and specialized areas of the market and disciplined processes towards delivering on our investment objectives for our clients. In addition, their active approach aims to capture value-add opportunities and navigate volatile periods through dynamic duration management, ensuring that interest rate sensitivity is appropriately toned up or down based on the prevailing yield environment.
Our Team
Our Funds
AGF Fixed Income Team
Andy Kochar is a principal member of AGF’s Fixed Income Team and serves as the firm’s head of global credit. Using a cross-asset framework, Andy is responsible for the research and allocation of credit risk across all of AGF’s fixed income portfolios.
He previously served as Associate Portfolio Manager for AGF’s credit-oriented portfolios from 2013 to 2018. Prior to that, for more than five years, Andy served as Investment Analyst, Credit Research at Acuity Investment Management, which was acquired by AGF in 2011.
Andy earned a B.A. in Economics (Cum Laude) from York University and he is a CFA® charterholder.
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
Jean-Sébastien Nadeau serves as Co-Portfolio Manager of AGF’s Short-Term Income and Money Market Strategies as well as AGF Systematic Global Multi-Sector Bond ETF. He is responsible for providing fundamental and credit research support, and has a strong background in developing quantitative models for both corporate and sovereign bonds, with specific expertise in the Technology, Media and Telecommunication sectors as well as the Consumer Cyclical sector.
Prior to joining AGF, Jean-Sébastien was a lead analyst at the Bank of Canada, with a focus on banks in North America, Europe and Asia as well as Government-related entities (GREs).
Jean-Sébastien earned a BBA (major in Finance) and MBA (Finance) from Université Laval. He holds a Financial Risk Manager (FRM) designation and is a CFA® charterholder.
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
As Co-Head of Fixed Income, Tom brings more than 15 years of experience managing a wide array of portfolios and is a key contributor to the team's analysis of the global macroeconomic landscape, with specific emphasis on currencies. He is responsible for developing currency strategy and providing counsel on the implications of currency moves for the firm.
He also serves as a portfolio manager of AGF Total Return Bond Fund/Class, AGF Emerging Markets Bond Fund and AGF Global Opportunities Bond ETF, and has served on AGF’s Asset Allocation Committee since 2016.
Tom earned a Bachelor of Commerce from the University of Toronto. He is a CFA® charterholder and a member of CFA® Society Toronto.
Registered as a Portfolio Manager under AGF Investments Inc. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
With nearly three decades of experience managing a wide array of fixed income portfolios, Tristan co-leads the AGF Fixed Income Team and helps navigate the global macroeconomic landscape with specific emphasis on global sovereign debt, especially hard and local currency Emerging Market debt.
Tristan serves as co-lead portfolio manager of AGF’s Global fixed income mandates – AGF Total Return Bond Fund/Class, AGF Emerging Markets Bond Fund and AGF Global Opportunities Bond ETF. He is also a co-lead portfolio manager on the AGF Strategic Income Fund.
Tristan earned an Honours B.A. in Mathematics from the University of Waterloo. He is a CFA® charterholder and a member of CFA® Society Toronto.
Registered as a Portfolio Manager under AGF Investments Inc. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
David Stonehouse oversees AGF’s North American and Specialty Investments teams while maintaining direct portfolio management responsibilities for his current mandates.
With nearly three decades of experience managing both fixed income and balanced mandates, David employs a rigorous and disciplined investment process combining a top-down approach to duration and asset allocation with a bottom-up approach to security selection. David is a member of The Office of the CIO – a structure within AGF’s Investment Management team. This leadership structure encourages and further embeds collaboration and active accountability across the Investment Management team and the broader organization.
David received a B.Sc. in Applied Science from Queen’s University, an MBA in Finance and Accounting from McMaster University and is a CFA® charterholder.
Registered as a Portfolio Manager under AGF Investments Inc. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
| Conor McKinnon* Credit Analyst |
Pranav Natarajan, FRM, CFA® Credit Analyst |
Jie Shi Analyst |
| Sherry Xu, MBA Foreign Exchange Analyst |
Izabela Siwoski Uliana, LL.B. Director, Multi Asset Portfolio Specialist |
* AGF Investments LLC. The AGF Fixed Income Team consists of individuals from AGF Investments Inc. and AGF Investments LLC. AGF Investments entities only provide investment advisory services or offer investment funds in the jurisdiction where such firm, individuals and/or product is registered or authorized to provide such services.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in share or unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please go to the investor price and performance section of AGF.com to get current standard performance information for each fund.
1 Morningstar Ratings and Rankings reflect performance as of February 28, 2023. AGF Global Convertible Bond Fund Series F - overall rating compared with 294 funds in the High Yield Fixed Income category. AGF Emerging Markets Bond Fund Series F - overall rating compared with 38 funds in the Emerging Markets Fixed Income category. AGF Fixed Income Plus Fund Series F - overall rating compared with 475 funds in the Canadian Fixed Income category. AGF Total Return Bond Fund Series F - overall rating compared with 437 funds in the Global Fixed Income category.
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The Overall Morningstar Rating™ measures risk-adjusted returns and is derived from a weighted average of the performance figures associated with its 3-, 5- and 10-year (if applicable) rating metrics.
2 FundGrade A+® Awards:
FundGrade A+® is used with permission from Fundata Canada Inc., all rights reserved. The annual FundGrade A+® Awards are presented by Fundata Canada Inc. to recognize the “best of the best” among Canadian investment funds. The FundGrade A+® calculation is supplemental to the monthly FundGrade ratings and is calculated at the end of each calendar year. The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade. To be eligible, a fund must have received a FundGrade rating every month in the previous year. The FundGrade A+® uses a GPA-style calculation, where each monthly FundGrade from “A” to “E” receives a score from 4 to 0, respectively. A fund’s average score for the year determines its GPA. Any fund with a GPA of 3.5 or greater is awarded a FundGrade A+® Award. For more information, see http://www.FundGradeAwards.com. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata.
AGF Fixed Income Plus Fund won in the Canadian Fixed Income CIFSC Category, out of 311 funds. The FundGrade A+ start date was 1/31/2013 and the FundGrade A+ end date was 12/31/2022.
AGF Global Convertible Fund won in the High Yield Fixed Income CIFSC Category, out of 191 funds. The FundGrade A+ start date was 1/31/2016 and the FundGrade A+ end date was 12/31/2022.
Certain performance returns presented are hypothetical and for illustrative purposes only. They do not represent actual performance of an AGF mutual fund or client, nor do they guarantee future performance. Historical performance results for investment indices have been provided for general comparison purposes only, and do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. One cannot invest directly in an index.
The commentaries contained herein are provided as a general source of information based on information available as of April 2023 and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication however, accuracy cannot be guaranteed. Market conditions may change and the Portfolio Manager accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained herein. Investors are expected to obtain professional investment advice.
AGF Investments is a group of wholly owned subsidiaries of AGF and includes AGF Investments Inc., AGF Investments America Inc., AGF Investments LLC, and AGF International Advisors Company Limited. The term AGF Investments may refer to one or more of the direct or indirect subsidiaries of AGF or to all of them jointly. This term is used for convenience and does not precisely describe any of the separate companies, each of which manages its own affairs.
References to specific securities are presented for illustrative purposes only and should not be considered as an indication of how the portfolio of any investment vehicle is or will be invested. It should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by AGF Investments.
Series F securities can be purchased under the simplified prospectus only through your registered dealer who has obtained consent of AGF to offer Series F securities.
“Bloomberg®” and Bloomberg US Aggregate Bond Index, Bloomberg Canada Aggregate Bond Index, Bloomberg Global Aggregate Bond Index, Bloomberg Global High Yield Index, Bloomberg US CnvtblsCsh Py>$250mn Index and Bloomberg USFRN 5-Yr Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by AGF Management Limited and its subsidiaries. Bloomberg is not affiliated with AGF Management Limited or its subsidiaries, and Bloomberg does not approve, endorse, review or recommend any products of AGF Management Limited or its subsidiaries. Bloomberg does not guarantee the timeliness, accurateness, or completeness, of any data or information relating to any products of AGF Management Limited or its subsidiaries.
Publication date: April 13, 2023