{"id":38018,"date":"2022-04-07T10:20:27","date_gmt":"2022-04-07T17:20:27","guid":{"rendered":"https:\/\/www.penderfund.com\/?post_type=commentaries&p=38018"},"modified":"2025-09-21T20:25:05","modified_gmt":"2025-09-22T03:25:05","slug":"pender-corporate-bond-fund-march-2022","status":"publish","type":"commentaries","link":"https:\/\/staging.penderfund.com\/fr\/commentaries\/pender-corporate-bond-fund-march-2022\/","title":{"rendered":"Pender Corporate Bond Fund \u2013 March 2022"},"content":{"rendered":"

The Pender Corporate Bond Fund returned -0.4%[1]<\/a> in March. While we never celebrate losses, it is worth noting that the Fund\u2019s monthly loss was less than a third of that of the high yield index for the same period and over two percentage points above the Canadian bond universe. In short, it was a volatile month and we emerged without many scars.<\/p>\n

In order to beat the average, it is important to do things that few others are doing, and March underscored the importance of that principle. Our Fund\u2019s resilience was supported by gains in Country Garden Holdings Company Limited (HKG: 2007) bonds as Chinese state-backed financial institutions came to the defense of better capitalized property developers such as Country Garden, relieving a panic that had taken bond prices, in some cases, below 50\u00a2 on the dollar. Our investment in Federal National Mortgage Association (OTCPK: FNMA) and Federal Home Loan Mortgage Corporation (OTCPK: FMCC) preferred shares also rose amid signs of the forthcoming emergence of these Government-Sponsored Entities (GSEs) from the conservatorship that arrived along with dividend suspension back in 2008. Finally, our position in the deeply discounted bonds of Plantronics, Inc. (NYSE: POLY) rallied from the low 80s to above par as that company agreed to be acquired by American hardware behemoth HP Inc. (NYSE: HPQ).<\/p>\n

Notwithstanding the positive developments noted above, the broader bond market continued to struggle in the face of high inflation and a hawkish Federal Reserve. Our position in 2027 notes issued by BCE Inc. (TSX: BCE), as an example, fell in price by more than 3% in March, amongst several lines that were red in the period. We aren\u2019t particularly worried about Bell Canada as an entity and consider the movement in bond prices merely to have shifted the Fund\u2019s return profile toward the future from the current period.<\/p>\n

A New View on Safety - Looking for Solid Footings Amid Turbulence<\/h4>\n

The past months of turbulence in fixed income markets have had a significant impact on investors\u2019 mindsets. Where an allocation to bonds was traditionally seen as a place of calm that moderated the sometimes volatile swings in equities, recently bonds themselves have been a source of trouble. New questions emerge as the familiar, benevolent tailwind of gently falling risk-free rates is replaced by the prospect of a Treasury yield chart that moves up and to the right, presenting investors with lurching volatility. In such an environment, where do investors look for safety?<\/strong><\/p>\n

We see safety in accordance with three criteria, a safe investment should be able to provide: (1) real value<\/u>, after inflation; (2) substantial insulation against potential loss<\/u>; and (3) an ample degree of liquidity<\/u>. Let us discuss these three elements in turn.<\/p>\n

Holding real value<\/strong> is an important aspect of investment safety in 2022. While cash maintains nominal value, inflation reduces purchasing power and effectively results in real losses for cash. Even government bonds and GICs in the current environment offer a high probability of negative real returns, given yields well below inflation. We consider two prime methods of ensuring real return:<\/p>\n