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Fixed Income Commentary: As at March 31, 2022

Source: Phil Mesman, CFA | Sam Acton, CFA
Publish Date: Apr 14, 2022
Read Time: 3 minutes
Picton Mahoney Fixed Income Fund Class F icon     Picton Mahoney Fortified Income Alternative Fund Class F icon     Fund profiles icon   

In Q1, the Picton Mahoney Fortified Income Fund (Class F) returned -1.74% and the Picton Mahoney Fortified Income Alternative Fund (Class F) returned -1.43% significantly outperforming the blended benchmark composed of 75% ICE BofAML Global High Yield Index / 25% ICE BofAML Global Corporate Index (TR) (Hedged to CAD). Defensive positioning and portfolio hedging primarily drove the outperformance in the quarter.
 
During the first quarter we saw the U.S. Federal Reserve (the Fed) continue its hawkish tone in response to high inflation and a tight labour market. While geopolitical events created uncertainty on the growth outlook, the near-term impact of higher commodity prices put additional pressure on central bankers to push back against inflation. Despite the US 2-Year Treasury Yield rising 161 bps during the quarter2, risk assets including equities and credit spreads were only modestly weaker.
 
Given the Fed’s use of financial conditions as a policy transmission mechanism to the real economy, we believe the resilience of equities and credit creates an awkward setup for the Fed as they may need to be even more aggressive than current expectations to effectively combat the risk of higher inflation.
 
With these potential headwinds and still tight credit spreads, we have positioned the funds defensively with hedges in place to help protect against rate and credit volatility and with dry powder to take advantage as we see higher all-in yields on high quality credit.

Performance table for Picton Mahoney Fortified Income Fund (Cl.F), Picton Mahoney Fortified Income Alternative Fund (Cl.F) and their benchmarks
 
This material has been published by Picton Mahoney Asset Management (“PMAM”) on April 14, 2022. 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.

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