Guardian Strategic Income Fund
Fixed income for a full market cycle
6.6%
Yield1Guardian Strategic Income Fund is a liquid alternative mutual fund2 focused on generating attractive, stable income and capital appreciation from credit securities, such as fixed-income or debt securities, corporate bonds, loans, hybrids, bank capital instruments and convertible securities.
The strategy will use derivatives with the aim to reduce volatility and correlation to traditional fixed income. The Manager seeks to deliver an absolute return profile that generates positive returns regardless of fixed income market conditions.
Key Reasons to Invest
High Income
Seeks to generate monthly income that is generally higher than traditional investment grade fixed income
Risk Mitigation
Seeks to preserve capital by hedging against systemic risks, with low volatility and low correlation to traditional bond and equity markets
Active and Flexible
Opportunistic approach to security selection across a broad investable universe, tactically taking advantage of yield curve and credit spread dynamics
A liquid alternative strategy aiming to dampen volatility
Many liquid alternative strategies use leverage and options aiming to increase the return of their strategy, which usually corresponds with an increase in risk. This Fund generally aims to employ derivatives for hedging (rather than speculative) purposes, seeking to primarily reduce volatility associated with macro factors.
How could this Fund fit within a portfolio?
Income-enhancer to complement traditional core fixed income exposure
Volatility-reducer relative to traditional high yield exposure, through its tactical ability to hedge credit, interest rate and currency risk
Alternative to balanced fund allocation, as it seeks to deliver higher yield and returns than traditional fixed income with less volatility than equities
Liquid alternative solution that provides investors enhanced access to their capital relative to other, less liquid alternatives (i.e., private markets)
Diversifier that aims to provide the benefit of low correlation to traditional bond and equity markets
Strategies utilized that make the Fund unique
Active Risk Management
Tactical hedging of: Interest rates | Credit spreads | Currency | Volatility
Go-Anywhere Approach
Unconstrained credit strategy that aims to identify the most attractive risk-adjusted opportunities
Diversified Sources of Return
Active credit selection | Duration/yield curve positioning | Income generating stocks (maximum 10%)
Portfolio selection process
Guardian Strategic Income Fund is a flexible mandate with numerous levers at its disposal that aim to generate attractive risk-adjusted returns. It invests primarily in high yield credit securities that the Manager believes have attractive risk-adjusted internal rate of return. At the same time, it tactically employs hedging to help mitigate downside risks associated with credit exposure (ie. default risk).
DERRICK KNIE, CFA, M.Fin
Portfolio Manager | 29 years of experience
The credit market cycle
Credit market cycles are different from equity cycles, as they are sometimes driven by macro-economic shocks and adverse monetary conditions rather than forward looking earnings. Different fixed income securities tend to generate different return profiles at different phases of the credit cycle. For example, high yield credit can generate attractive returns through a full cycle but can experience certain periods of higher volatility versus investment grade bonds.
The Manager of the Guardian Strategic Income Fund will generally seek to have meaningful exposure to high yield credit but can dynamically shift exposure using other fixed income securities or derivatives to attenuate volatility during these periods.
How the Fund manages credit through each phase of the cycle
| PERIOD | ENVIRONMENT | TIME FRAME | STRATEGY | ACTION |
|---|---|---|---|---|
| Phase 1 | Deteriorating (spreads widening) | Typically short-term | Defensive | Focus on capital preservation |
| Phase 2 | Recovery (spreads tightening) | Typically short-term | Add Risk / Build Positions | Collect strong income and capital gains |
| Phase 3 | Stable | Longer lasting | Collect / Monitor | Collect strong income and capital gains |
Example for Illustrative Purposes Only.
Source: GCLP based on data from ICE BofA and BofAML as of August 31, 2024.
High Yield Spread: ICE BofA High Yield Index Yield less Generic 10 Year US Government Yield.
High Yield Default Rate: Uses BofAML US High Yield Default Rate.
Investing involves risk, including loss of principal. There is no guarantee that this, or any, investing strategy will be successful or that the investment decisions will be profitable.
Fees and Fund Codes
| FUND INFO | SERIES A | SERIES F | ETF |
|---|---|---|---|
| Fund Code/Ticker | GCG 558 | GCG 657 | GSIF |
| Management Fee | 1.85% | 0.85% | 0.85% |
| Performance Fee* | 15% above high-water mark and hurdle amount | ||
| High Water Mark | Highest Series NAV per Unit on any prior valuation day | ||
| Hurdle Rate | Chartered banks 5-year GIC rate + 100bps as of prior year | ||
*The Fund pays the Manager a Performance Fee equal to 1% of the amount by which the investment performance of the applicable series of Units exceeds the aggregate of the High Water Mark and the cumulative Hurdle Amount during the Performance Period.
Please refer to the Fund's prospectus for additional details.
Contact us today to learn more about the
Guardian Strategic Income Fund
1 Distribution Yield shown is the twelve-month trailing distribution yield of Series F (net of fees), as a percentage of its NAV as at June 30, 2024.
2 This Fund is an alternative mutual fund. It is permitted to invest in asset classes or use investment strategies that are not permitted for other types of mutual funds. The specific strategies that differentiate this Fund from other types of mutual funds include borrowing cash, engaging in short selling and investing in specified derivatives. While these strategies may be used in accordance with the Fund's objectives and strategies, during certain market conditions they may accelerate the pace at which your investment changes in value. The Fund also pays the Manager a Performance Fee equal to 15% of the amount by which the Investment Performance of the applicable series of Units exceeds the aggregate of the High Water Mark and the cumulative Hurdle Amount during the Performance Period. Please refer to the Fund's prospectus for additional details.
This commentary is for general information purposes only and does not constitute investment, financial, legal, accounting, tax advice or a recommendation to buy, sell or hold a security. It shall under no circumstances be considered an offer or solicitation to deal in any product or security mentioned herein. It is only intended for the audience to whom it has been distributed and may not be reproduced or redistributed without the consent of Guardian Capital LP. This information is not intended for distribution into any jurisdiction where such distribution is restricted by law or regulation.
The opinions expressed are as of the date of publication and are subject to change without notice. Assumptions, opinions, and estimates are provided for illustrative purposes only and are subject to significant limitations. Reliance upon this information is at the sole discretion of the reader. This document includes information concerning financial markets that were developed at a particular point in time. This information is subject to change at any time, without expectations regarding future events. Forward-looking statements require assumptions to be made and are, therefore, subject to inherent risks and uncertainties. There is a significant risk that predictions and other forward-looking statements will not prove to be accurate. Investing involves risks. Equity markets are volatile and will increase and decrease in response to economic, political, regulatory and other developments. Investments in foreign securities involve certain risks that differ from the risks of investing in domestic securities. Adverse political, economic, social or other conditions in a foreign country may make the stocks of that country difficult or impossible to sell. It is more difficult to obtain reliable information about some foreign securities. The costs of investing in some foreign markets may be higher than investing in domestic markets. Investments in foreign securities also are subject to currency fluctuations. The risks and potential rewards are usually greater for small companies and companies located in emerging markets. Bond markets and fixed-income securities are sensitive to interest rate movements. Inflation, credit and default risks are all associated with fixed income securities. Diversification may not protect against market risk and loss of principal may result. Index returns are for information purposes only and do not represent actual strategy or fund performance. Index performance returns do not reflect the impact of management fees, transaction costs or expenses. Certain information contained in this document has been obtained from external parties, which we believe to be reliable; however, we cannot guarantee its accuracy.
