Income Fund

March 31, 2022

Market Context

  • The Canadian bond market fell 7.0% in the quarter (interest less capital depreciation).
  • Bond yields rose sharply, with the 10-year Government of Canada bond yield climbing from 1.4% to 2.4%.
  • Canadian stocks gained 3.8%. Energy and commodity stocks were areas of strength.

Portfolio Specifics

  • Bonds turned in their worst quarter in recent memory as both inflation and bond yields spiked (when yields rise, prices fall). The Bank of Canada and U.S. Federal Reserve raised their key short-term lending rates in March for the first time since 2018, and signaled more increases to come. The moves are being made to help combat surging inflation and pull back some of the stimulus that has helped prop up the economy throughout the pandemic. The overall rise in rates hurt the fund.
  • Our fixed income investments fared modestly better than the market. Our manager, Connor, Clark & Lunn, had an interest rate strategy in place that benefited from a flattening yield curve (whereby the difference between short-term and long-term yields narrowed). Our holdings in real return bonds also added value. These securities pay a return that is adjusted for inflation.
  • Corporate bonds have long been an important part of the fund, and remain so (roughly 30% of the portfolio). CC&L has become more defensive in its security selection recently, favouring companies with strong balance sheets in the insurance, banking, and REIT sectors. Exposure to the infrastructure industry was reduced.
  • High yield bonds make up 5% of the fund. These securities were down in the quarter, but performed better than government bonds. Focus remains on higher quality issuers, such as Enbridge, First Capital Realty, Sprint, and Ford.
  • The equity portion of the portfolio (26%) generated a positive return, driven by our holdings in energy (ARC Resources), banks (BMO), materials (Nutrien), and transportation (CN Rail). By contrast, real estate securities were weak.
  • Stock holdings are focused on companies with stable growth characteristics, pricing power, and resilient margins. Financials, REITs, and industrials remain key areas of interest. Additionally, we like the outlook for renewable energy, where investments include Brookfield Renewable Partners, Northland Power, and Boralex.
  • The fund paid a distribution of $0.045/unit at the end of March.


  • Our manager believes global growth is set to slow as a result of inflation and supply issues. Accordingly, our focus is on companies with strong balance sheets.
  • Stocks make up 26% of the fund and remain an important source of diversification and yield. Our current bias is towards high-quality large cap stocks.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Important information about the Steadyhand funds is contained in our Simplified Prospectus. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.