PIM: Diversified Income Portfolio

Paul Borisoff - Sep 12, 2018

PIM: Diversified Income Portfolio – September 10th, 2018


The Diversified Income Portfolio* was up 0.9% in August – leaving the portfolio up 2.4% in 2018 – and 7.9% higher over the last twelve months. In comparison, our benchmark was up 0.3% in August – leaving it up 0.1% in 2018 – and 3.2% higher over the last twelve months.


* These returns are reported as a composite, time-weighted, rate-of-return (gross of fees, net of transaction charges) for all accounts in this mandate. Long-Term Returns/Benchmark Numbers will be reported in our Quarterly Updates.


S&P/TSX Composite High Dividend Index (40% of our benchmark) was down 0.4% in August and is now down 0.8% in 2018. Over the last twelve months this index is up 6.0% though.


In contrast the Canadian bond market (FTSE/TMX Canada Universe Bond dex) was up 0.8% in August– and is now back into positive territory in 2018 (up 0.6%). Over the last twelve months bonds are up 1.3% –compared to the last three-year average return of 1.9% per year. We still do not see much room for improvement going forward on this asset class – with the possibility of negative returns over certain periods if rates move sharply higher.


We continue to believe that we have very good visibility to an expected significant pick-up in expected returns over the balance of 2018 based on our overall asset class exposure (i.e. convertible debentures and 3rd party funds hedged against rising rates) and based on the individual securities that we hold in the portfolio.


Recent Portfolio Changes – and Highlights:


We sold the portfolio’s Agellan Commercial REIT position in August at $14.05 per unit locking-in a 37.2% return excluding dividend. We acquired this position in August 2016 – and think the REIT has limited further upside over the next few months from current levels.


We then increased our exposure to our IBI Group 5.50% 31DEC21 convertible debenture to 4.6% of the portfolio at 101.08. This is a company we have followed for many years – and we took advantage of the weakness seen in the convertible debenture following their “soft” quarterly report in August.

Also, we are pleased to report that our Chorus Aviation (CHR) position which we doubled at $7.30 per share in July closed at $7.91 at month-end (6.1% yield) – leaving us back in a positive position.




At month-end the portfolio’s cash position was sitting at ~7.0% and our convertible debenture exposure was approximately 36.1%. Total Cash and Fixed Income exposure including our four 3rd party specialty fixed income manager positions was ~69.0% at month-end.


We continue to strongly believe that the portfolio’s composition and flexibility offers a substantially improved risk/reward trade-off compared to an “income portfolio” relying only on government bonds and pure stock market exposure to drive returns and income.


Although large investors often face size and liquidity constraints there are many attractive income opportunities which retail investors and small institutional investors can incorporate into their portfolio if they know where to look – and then complete the detailed due diligence required. That is what we plan on continuing do as we strive to deliver consistent above average returns.


In the meantime, please do not hesitate to contact me if you have any question or concerns.



Paul J. Borisoff

Senior Vice President

Portfolio Manager, Senior Investment Advisor