Income Fund

June 30, 2021

Market Context

  • The Canadian bond market gained 1.7% in the quarter (interest and capital appreciation).
  • Bond yields were divergent through the period. Short-term yields rose while long-term yields declined.
  • Canadian stocks gained 8.5%. The energy sector was a notable area of strength.

Portfolio Specifics

  • Bonds comprise 72% of the portfolio. The fund’s holdings had a positive quarter as yields on long-term bonds declined. Bonds with longer maturities are more sensitive to yield changes. The gains were partially offset by a rise in yields in shorter-term bonds (5 years and less).
  • Provincial bonds also performed well. These securities make up roughly one-quarter of the portfolio, the largest percentage of which are bonds issued by Ontario.
  • In response to the gains, the manager (Connor, Clark & Lunn) trimmed the fund’s exposure to provincial bonds and added to federally-issued securities. The latter continue to be a small part of the fund’s overall composition in comparison to provincial and corporate credit.
  • Corporate bonds continue to make up the largest part of the portfolio with an emphasis on banks and telecoms because of their strong balance sheets. But the manager is also seeing opportunities in bonds lower down the capital structure and those issued by cyclical companies in the resource space.
  • High yield bonds comprise 5% of the fund with a focus on higher-quality issuers and those with strong liquidity. Examples include Videotron, Ford Credit, and Levi Strauss.
  • The fund’s dividend stocks (28% of the portfolio) performed well, gaining more than 6% overall. Key sectors of investment include banks, real estate, industrials, telecoms and utilities. The manager has remained steadfast in its philosophy of buying stocks that are proven dividend growers operating in stable growth industries. The portfolio avoided any dividend cuts last year and thus far in 2021. In fact, two-thirds of our investments increased their dividend, which speaks to the quality of holdings.
  • The fund paid a distribution of $0.045/unit at the end of June.

Positioning

  • CC&L feels that low interest rates and accommodative policies will remain in place. This outlook is supportive of a healthy weighting in corporate bonds.
  • Stocks make up 28% of the fund and remain an important source of diversification and yield. The manager has a current bias 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.