Bank of Canada’s bond-buying program will now further support the fixed-income market by directly including hedge funds. Portfolio manager Andrew James Labbad explains how this can benefit Amplus Fund.
On Tuesday, the Bank of Canada (BoC) announced an expansion of it’s Corporate Bond Purchase Program (CBPP) to allow buy-side participants, such as Wealhouse Capital Management, to sell bond holdings directly to the BoC via a primary dealer .
Since the program was first launched in May, as a result of the economic fallout due to COVID-19, the CBPP has successfully served as a backstop to support the Canadian corporate bond market, which is currently very robust and healthy. This change will create additional peace of mind for investors. The bonds eligible for this program are mostly 1- to 5-year investment-grade bonds from corporate (i.e. non-bank) issuers. The capacity of this program was originally set for $10 billion and as of today, BoC has only deployed ~$151 million so far. In other words, the gates are still wide open, with plenty of additional capacity to support the fixed-income corporate market.
Starting October 20th, Wealhouse can go directly to the Bank of Canada via a primary dealer for increased liquidity, avoiding the dealers’ limitations of selling their own risk. Our portfolio is properly setup to take advantage of this program, both directly and indirectly, with ~65% of our portfolio eligible for this new program.
Amplus, an innovative and flexible fixed-income strategy, is the place to be during good times and bad. It aims to protect investors during a downturn and maximize returns in a rising market. We invest in high-quality companies that are raising debt to invest in the growth of their businesses. We support their mission by purchasing bonds, preferred shares, and convertible notes, increasing our investment when the time is right. A small and agile fund combined with active trading, we can take full advantage of market volatility. Because Wealhouse’s goal is to make as much money for our investors as possible, we do not have layers of bureaucracy that hinder time-sensitive trades. During a sell-off, we can buy quickly. And during a market rally, we can sell just as fast.