By Canada Life Investment Management | June 16, 2022

On the Canada Life™ Portfolio Manager Connect Series, we were joined by Darren McKiernan, SVP, Portfolio Manager and Head of the Global Equity and Income Team and Konstantin Boehmer, SVP, Portfolio Manager and Co-Lead of the Fixed Income Team. They unpacked how they find balance in today’s investment landscape by combining a diversified, global approach to equities with a flexible fixed income mandate. The result is the Canada Life Global Strategic Income Fund, a core holding for growth and steady income.¹

You help clients balance competing financial demands every day. They might be trying to grow savings for a new home, put a child through school and save for retirement all at the same time. A balanced solution helps clients avoid risking more than they can comfortably afford to lose, while still providing the growth they need to reach their goals.

Equities – passing the test for a place on the dividend dream team

When selecting companies for investment, Mackenzie is style agnostic – this means the team doesn’t prioritize either value-oriented stocks, such as utility companies, or growth stocks, such as tech firms. Instead, to generate risk-adjusted returns they focus on high quality, dividend-paying businesses that are near the top of the value chain. They carefully balance between high-yielding companies that pay shareholders significant dividends – providing income – and those that are growing this capability, which can boost the value of owning them.

While the managers have the flexibility to shift the asset mix between 40% to 60% equities, this allocation is typically carefully adjusted in a more modest range. For example, recently equities ranged between 50% during the March 2021 sell-off to 55% during the high we experienced over the following April and May.

Key characteristics:

• 40-80 companies
• Diversified sector, geographic and industry exposure
• Modest position sizes: top 10 holdings generally range between 2-4%
• Turnover < 20% 

Fixed income – a flexible strategy with global exposure 

The fixed income component strikes a balance between opportunities and safety, with an ‘A’ rating for average credit quality. 

• Tactical, truly global fixed income exposure across more than 30 countries
• Average credit quality will remain above BBB- over the market cycle
• Strive for low volatility 

How is Mackenzie managing the fund today?

While we remain in an ultra-low yield environment, there are yield opportunities spread across pockets of the globe. Mackenzie believes inflation has likely peaked at 8.5% in the U.S. and we’ll see gradually declining inflation rates. That doesn’t mean inflation will be gone tomorrow – there’s still significant uncertainty. Central banks will need to continue to act and they won’t be comfortable until we’re well below even half of current figures. Ultimately, Mackenzie doesn’t see runaway inflation occurring. 

For fixed income, they’ve made the following moves:

• Added to duration to counter the weaker economic growth expected as a result of the inflationary environment – reversing a short in European bonds and adding duration at the long end of the curve in Canada and the U.S.
• Continuing to invest heavily in inflation-linked bonds; around 20% of fixed income holdings in the fund are inflation-linked in nature.
• Emerging market investment continues to be centred on Latin America, where markets benefit from a focus on commodities, proximity to the U.S. and distance from geopolitical conflict.   

For equities:

• Continuing to hold a diversified mix of high-quality businesses without focusing on a particular style or sector.
• A focus on dividend-paying companies around the world helps insulate against the risks that come with today’s inflationary, rising-rate environment.

Talk to your Canada Life wealth wholesaling team today for more information on the Canada Life Global Strategic Income fund, a balanced fund that’s built to be the core of your client’s portfolio for growth and steady income.