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Fixed Income Commentary: As at December 31, 2020

Source: Phil Mesman, CFA
Publish Date: Jan 15, 2021
Read Time: 3 minutes
  • In Q4, the Picton Mahoney Fortified Income Fund returned 3.41% (Class F) and the Picton Mahoney Fortified Income Alternative Fund returned 3.90% (Class F) underperforming the blended benchmark composed of 75% ICE BofAML Global High Yield Index / 25% ICE BofAML Global Corporate Index (TR) (Hedged to CAD). Our special-situation investments contributed to performance in the quarter including several event-driven situations as well as our positioning in the global banking sector. While the funds outperformed the blended benchmark for full year 2020, our relatively defensive positioning in higher quality credit contributed to the underperformance during Q4.
  • The quarter enjoyed continued strong performance in most risk assets as the market embraced positive vaccine data which created hope for a return to normal at some point in 2021. While the timeline of the recovery remains uncertain, with governments committed to additional fiscal stimulus and central banks supporting the market via asset purchases, we believe credit remains an attractive asset class.
  • However, valuations are stretched with yields and credit spreads on corporate bonds at the low end of the historical range. We are also becoming increasingly cautious about longer-dated bonds, as we see unprecedented fiscal deficits and government bond supply combined with a forward outlook that could be quite inflationary in a return to normal scenario.
  • We continue to be very active with new idea generation and have added several new special-situation investments during the quarter. We see a trend of issuers focusing on improving their balance sheets via mergers and acquisitions, asset sales, and early refinancings and these are all great potential sources of event-driven investments for our portfolio.
  • Given the stretched valuations in fixed income we believe it’s a great opportunity to layer in hedges in both credit and rates to reduce potential volatility as we enter 2021 with several identifiable risks remaining on the horizon (e.g. vaccine efficacy, shifting political landscape in the U.S., structural economic changes resulting from COVID, large government deficits with the potential for an inflationary environment, etc.).

Performance Returns Table for the Picton Mahoney Fortified Income Fund Class F and Picton Mahoney Fortified Income Alternative Fund Class F

For the funds’ full performance, visit
This material has been published by Picton Mahoney Asset Management (“PMAM”) on January 13, 2020. It is provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable, however, the accuracy and/or completeness of the information is not guaranteed by PMAM, nor does PMAM assume any responsibility or liability whatsoever. All investments involve risk and may lose value.

Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Alternative mutual funds can only be purchased through a registered dealer and are available only in those jurisdictions where they may be lawfully offered for sale.

There is no guarantee that a hedging strategy will be effective or achieve its intended effect. The use of derivatives or short selling carries several risks which may restrict a strategy in realizing its profits, limiting its losses, or, which cause a strategy to realize or magnify losses. There may additional costs and expenses associated with the use of derivatives and short selling in a hedging strategy.

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