The Trapeze Income Model is generally for clients whose principal objective is the generation of current income from investments.
The Trapeze Income Model seeks to provide consistent income, with lower volatility than Growth strategies (i.e., equities), often with the potential for capital appreciation. The Income Model follows a value approach to income investing, targeting securities which our analysis indicates are mispriced, with a view to providing above average risk-adjusted returns (from current income and potential capital gains). Trapeze income portfolios typically hold higher yielding corporate bonds and debentures, and may also hold preferred shares, REITs, income trust units and high dividend-paying stocks.
Investment opportunities are generated from a diverse group of businesses across North America which meet our criteria through investment and risk analysis. We invest in corporate bonds/debentures with potentially high returns (yield to maturity) relative to our assessment of the financial risk; in our view, these securities may be mispriced by the market with an opportunity for a capital gain. We screen a broad universe of securities to search and rank opportunities based on risk/return parameters and our research team then qualitatively analyzes specific securities. Issuer fundamentals, including cash flow and asset valuation, are stress-tested for interest coverage, asset coverage and the ability to honour maturities, in order to mitigate the risk of permanent loss.
Notionally, a minimum of 75% of an income portfolio is invested in liquid securities, which either trade on an exchange or are readily saleable over-the-counter (OTC) through broker-dealers (e.g., the majority of corporate bonds/debentures). A notional maximum of 25% is invested in illiquid securities (i.e., not readily saleable through an exchange or OTC through broker-dealers), which compensate for their illiquidity with potentially higher returns and/or features to mitigate risk; for bonds/debentures, this may include relatively higher coupon, considerable security, extremely short duration and/or potential equity participation or bonus payments. These securities may be issued by smaller corporations which tend to be unrated and less liquid than government-issued bonds or those issued by larger corporations.
Top Ten Holdings (as at September 30, 2018)*
SPECIALTY FOODS GRP, LLC CL 2
SPECIALTY FOODS GRP, LLC CL 1
MAGNACHIP SEMICONDUCTOR CORP SR NT 6.625% 15JUL2021
JAKKS PAC INC SR CV 144A 4.875% 01JUN20
ADVANTEX MRKTG INTL 9% 31DEC21
CORPORATE CAP TR INC
RIOCAN REAL ESTATE INVESTMENT TRUST
OAKTREE STRATEGIC INCOME CORP
MORGUARD NTH AMER RESID REIT
COMINAR REAL EST INVT. UTS
|Inception||Oct. 1, 1998|
|Investment universe||Corporate bonds & debentures, preferred shares, REITs, income trusts, high dividend-paying stocks, government bonds|