Our objective is to efficiently meet our individual and institutional clients’ investment needs. Supported by impeccable client service and reliable operations management utilizing cutting-edge technologies, the company is determined to stay the course of this business strategy, and ensure its future growth by broadening the array of asset classes and investment styles it brings to the marketplace.

Natcan Investment Management offers a comprehensive range of superior investment products across all global financial markets. In addition to our leading products for which you will find further information in this section’s menu of asset classes, the company manages several regional and sector mandates.

CORPORATE BONDS

The recent actions of central banks in response to the deterioration of economic conditions have caused long-term government bond returns to plummet. Investors have made considerable profits on these securities over the past few months, especially those who invested heavily in federal government bonds.

For long-term investors, deciding where to invest in the current environment is difficult if not agonizing. They must either accept meagre returns on government securities and lower their expectations of capital gains, or commit funds to riskier assets in an economic situation that shows few signs of improvement.

Bond markets have offered investors shelter from the storm, while government issuances were considered the asset of choice for preserving capital. The DEX Universe Bond Index ended 2008 on a high note, with returns of 2.88% in December and annual returns of 6.41%. Performance differed greatly between the various categories of bonds, as can be seen by contrasting the 11.51% rise in the DEX Federal Government Bond Index with the 28.35% fall in the Merrill Lynch High Yield Index (currency-hedged).

Our corporate bond portfolios significantly outperformed the benchmark in 2008. We believe that corporate bonds and high yield bonds are two sectors that will perform well over the coming months, as credit markets begin the inevitable stabilization process at a time of very wide spreads.

Although credit rating and choice of term are the most important parameters, the following table shows that the choice of activity sector is also important in managing risk for a corporate bond portfolio (Table 1). The table highlights the main yield differences among the various sectors.

Table 1 - Total annual yield as at December 31, 2008
	Short-term	Mid-term	Long-term	Total
Communications	5.36	1.7	-6.2	0.98
Energy	5.38	1.08	-10.06	-3.35
Financial	4.99	-2.81	-20.01	1.28
Industrial	4.82	-2.90	-11.71	-3.00
Infrastructure	6.10	1.53	-10.47	-3.79
Securitization	6.52	5.53	N/A	6.48

Natcan has the expertise to effectively manage such multi-faceted risks and limit major performance differences from the benchmarks.

A Good Alternative

The deterioration of credit conditions across the globe has pushed expected default rates for corporate bonds to very high levels. Together with the increase in liquidity premiums, this situation has produced performance attractive spreads for long-term investors. 

An improvement in economic conditions over the coming quarters will help narrow spreads and result in relatively lower corporate financing rates.

More aggressive investors may also be interested in the advantages of reallocating part of their portfolio to a high yield bond fund.

For more conservative investors, we recommend the Natcan Corporate Universe Bond Fund. Although this fund produces a lower current yield, its issuers have superior credit quality.

We invite you to consult the Fixed Income section for additional information.