Investments

Fixed Income
Allocation
14.9%
Annual return
3.78%
Exposure
$1.4 B
Benchmark
3.31%
2024 performance
The bond portfolio generated a return of 3.78% in 2024, compared to a benchmark return of 3.31%. The outperformance was driven by an overweight corporate credit position that was maintained throughout the year.
Divergence was the theme for the Canadian bond market in 2024 as the historically close link with the US bond market broke down particularly in the latter part of the year. Driving this divergence was a combination of a much weaker Canadian economy, meaningful progress in bringing inflation down to 2%, and uncertainty regarding trade policies by the incoming US administration. This allowed the Bank of Canada to cut rates by 175 basis points in 2024 compared to only 100 basis points by the US Federal Reserve.
Overall, 10-year yields in Canada increased a modest 11 basis points ending at 3.22%. In the US, 10-year yields increased by 70 basis points ending at 4.58%.
Investment approach
We manage the bond portfolio with a focus on liquidity and safety. The portfolio positioning with regards to sector weights, curve, and duration are determined by a top-down assessment of the economy and the credit cycle. Relative value trading is done to take advantage of opportunities both within and amongst the different sectors.
To maintain liquidity in the corporate holdings, the portfolio is invested in the largest issuers in the market, which tend to be regulated utilities and other infrastructure-related companies. Due to their size in the benchmark, the big 5
Canadian banks tend to make up the bulk of the corporate holdings in the front end of the curve.
Sector allocation
We began the year with a corporate weighting of 38% (25% benchmark). Credit spreads were still relatively wide to begin the year and the mix of carry and potential for spread tightening was favourable.
Flows into fixed income combined with insufficient new issue supply helped to propel corporate spreads over 35 basis points tighter, reaching some of the tightest levels witnessed over the past decade in some sectors.
As corporate spreads tightened, we decreased corporate exposure to 36%. The biggest reduction to corporate exposure occurred in the long end of the curve where outright valuations left minimal room for additional performance.
The provincial sector also benefited from the broad spread tightening environment. As a result, we reduced exposure to the sector from 40% down to 36% (42% benchmark) as risks loom from a potential trade war with the US.
Fixed Income
You can't include multiple times the same chart.
Allocation
14.9%
Annual return
3.78%
Exposure
$1.4 B
Benchmark
3.31%
2024 performance
The bond portfolio generated a return of 3.78% in 2024, compared to a benchmark return of 3.31%. The outperformance was driven by an overweight corporate credit position that was maintained throughout the year.
Divergence was the theme for the Canadian bond market in 2024 as the historically close link with the US bond market broke down particularly in the latter part of the year. Driving this divergence was a combination of a much weaker Canadian economy, meaningful progress in bringing inflation down to 2%, and uncertainty regarding trade policies by the incoming US administration. This allowed the Bank of Canada to cut rates by 175 basis points in 2024 compared to only 100 basis points by the US Federal Reserve.
Overall, 10-year yields in Canada increased a modest 11 basis points ending at 3.22%. In the US, 10-year yields increased by 70 basis points ending at 4.58%.
Investment approach
We manage the bond portfolio with a focus on liquidity and safety. The portfolio positioning with regards to sector weights, curve, and duration are determined by a top-down assessment of the economy and the credit cycle. Relative value trading is done to take advantage of opportunities both within and amongst the different sectors.
To maintain liquidity in the corporate holdings, the portfolio is invested in the largest issuers in the market, which tend to be regulated utilities and other infrastructure-related companies. Due to their size in the benchmark, the big 5
Canadian banks tend to make up the bulk of the corporate holdings in the front end of the curve.
Sector allocation
We began the year with a corporate weighting of 38% (25% benchmark). Credit spreads were still relatively wide to begin the year and the mix of carry and potential for spread tightening was favourable.
Flows into fixed income combined with insufficient new issue supply helped to propel corporate spreads over 35 basis points tighter, reaching some of the tightest levels witnessed over the past decade in some sectors.
As corporate spreads tightened, we decreased corporate exposure to 36%. The biggest reduction to corporate exposure occurred in the long end of the curve where outright valuations left minimal room for additional performance.
The provincial sector also benefited from the broad spread tightening environment. As a result, we reduced exposure to the sector from 40% down to 36% (42% benchmark) as risks loom from a potential trade war with the US.