The Canadian equity landscape and the fund’s performance along with PH&N’s fixed income solutions are examined here and how they fared in the second quarter of 2023.
PH&N Bond Fund - Q2 2023
The yield of the FTSE Canada Universe Bond Index ended the quarter at 4.4%, an increase of approximately 0.4% from where it began the quarter. Yields continued to exhibit remarkable volatility this quarter and ended meaningfully higher and the Government of Canada yield curve inverted further, while broad credit spreads tightened on the back of improved investor risk appetite. Stronger-than-expected economic data caused the BoC to hike its policy rate. The market’s expectations for the future path of policy rates remained volatile, as expectations shifted from rate cuts in late 2023 to further rate increases by the end of the year. The fund finished ahead of the benchmark for the quarter with contributions coming from both interest rate anticipation and credit strategies. The fund maintained its medium level of risk over the quarter; however, we remain focused on more liquid, high-quality areas of the market, as we are cognizant that we are in the late stage of the business cycle and that recession risk remains prevalent.
PH&N Core Plus Bond Fund - Q2 2023
The yield of the FTSE Canada Universe Bond Index ended the quarter at 4.4%, an increase of approximately 0.4% from where it began the quarter. Yields continued to exhibit remarkable volatility this quarter and ended meaningfully higher and the Government of Canada yield curve inverted further, while broad credit spreads tightened on the back of improved investor risk appetite. Stronger-than-expected economic data caused the BoC to hike its policy rate. The market’s expectations for the future path of policy rates remained volatile, as expectations shifted from rate cuts in late 2023 to further rate increases by the end of the year. The fund finished ahead of the benchmark for the quarter with contributions coming from both interest rate anticipation and credit strategies, as well as contributions from out-of-benchmark allocations to high yield bonds, mortgages, and emerging market debt. The fund maintained its medium level of risk over the quarter; however, we remain focused on more liquid, high-quality areas of the market, as we are cognizant that we are in the late stage of the business cycle and that recession risk remains prevalent.
PH&N Dividend Income Fund - Q2 2023
The Canadian equity market ended the second quarter in positive territory, as the S&P/TSX Composite Index returned 1.1% in Q2. Measured in Canadian dollars, the TSX underperformed both the S&P 500 and MSCI World, largely due to its smaller technology exposure relative to global counterparts. Investors also continued to focus on macroeconomic factors, including inflation and interest rates. Among the top-performing TSX sectors during the quarter were Information Technology and Consumer Discretionary. The fund underperformed the Canadian equity market this quarter, posting a return of 0.8%, with 4/11 sectors contributing positively to relative performance, particularly Materials and Energy, while Information Technology and Communications detracted the most. Overall, we remain focused on the intrinsic value of businesses, and on identifying businesses with stable and growing dividends offering attractive risk/reward opportunities.
PH&N Balanced Pension Trust Q2 2023
Equity markets continued their grind higher from the fall-2022 lows, The rally in the early part of the year was broad-based across regions, as gains were fairly narrow and focused on AI-related names in Information Technology and Communication Services. Additionally, though central banks globally continued to raise rates, the pace of increase has slowed and the hiking cycle appears to be approaching the finish line. While the massive hikes are now outright restrictive for the economy, most developed-world central banks have a bit more tightening to do in the near term. Against this backdrop, our Asset Mix Committee believes it is prudent to keep the portfolios at their neutral targets and wait for better opportunities to add equity risk, we did however execute one rebalance in mid-April, which resulted in a small trim of equities in favour of bonds. Over Q2 the fund returned 1.2%, bringing the one-year return to 10.2%.
