Fixed income

Our approach to Canadian Fixed Income

As part of our heritage, we have long standing experience in managing insurance assets within a set of high investment constraints. This focus has allowed us to successfully develop an investment process that maximizes portfolio efficiency while offering strong portfolio resilience, providing our clients with capital preservation while still capturing the upside potential.

Portfolio construction

We look to maximize portfolio efficiency, a portfolio’s return potential for a given set of risk constraints. By maximizing efficiency, it is possible to exploit the structural inefficiencies of an index (or market) and leverage broad idiosyncratic mispricing with minimal risk. While this focus on efficiency may appear intuitive, it can allow investors to uncover and take advantage of many non-intuitive positioning opportunities.

Connected thinking

We have an established investment team in Canada, complemented by robust global credit investment resources, who assess investment opportunities and risks from a Canadian perspective. Our common investment language, based on a framework of macro economic factors, fundamentals, valuations and thematics (“MFVT”) ensures that we capture the most efficient & reliant opportunities, both market and credit, within our portfolios.

Resilience targeting

Staying honest to fixed income’s purpose. Resilience targeting is about choosing the ‘efficient’ portfolio that best leverages our central investment thesis but will not be materially affected should the thesis fail to deliver. This helps build strong downside protection and positive asymmetry in expected returns for the portfolio.

Strategies in focus

Our longstanding team of portfolio managers follow a consistent approach across our range of Canadian fixed income capabilities, including our pooled funds and separate managed strategies.

Aviva Investors Canadian Core

This strategy aims to provide enhanced and consistent long-term returns that are less reliant on market directionality with lower volatility and improved downside protection. Our investment objective is to outperform the FTSE TMX Canadian Bond Universe by 30bps over a full market cycle, focusing on the local Canadian Investment-Grade Market.

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Aviva Investors Canadian Core Plus

This strategy aims to provide enhanced and consistent long-term returns that are less reliant on market directionality with lower volatility, improved downside protection and better issuer diversification through global investments. Our investment objective is to outperform the FTSE TMX Canadian Bond Universe by 100bps over a full market cycle. High Yield exposure is limited to a maximum of 20% of the portfolio.

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Aviva Investors Canadian Core Plus Climate Transition

This strategy aims to provide investors with a dual outcome of outperforming the FTSE TMX Canadian Bond Universe by 80bps over a full market cycle, while allocating to those companies that are doing the most to support solutions, or managing the risks and opportunities, associated with climate

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Key risks

Fixed income investments have a reputation for safety but are not without risks. The risks below are illustrative. Other risks also exist. For further information, please contact our investment team.

Interest rate risk

Changes in interest rates are one of the most important factors that could affect the value of an investment. Rising interest rates tend to cause the prices of fixed income securities to fall. Callable fixed income debt securities are likely to be called when interest rates are falling because the issuer can refinance at a lower rate. This strategy will make the use of bond futures or forwards to minimize unintended interest rate risk when making an allocation to non-Canadian dollar securities.

Foreign exchange risk

All exposures to fluctuations in foreign currency movement against the Canadian dollar will be substantially hedged by use of currency forwards.

Credit risk

The credit rating or financial condition of an issuer may affect the value of a fixed income debt security. Generally, the lower the quality rating of a security, the greater the expected risk that the issuer will fail to pay interest fully and return principal in a timely manner. Adverse economic conditions or changing circumstances may weaken the capacity of the issuer to pay interest and repay principal and may cause a security to lose some or all of its value.

Liquidity risk

All investments carry liquidity risk, that is the risk that a security will not be able to be sold in a timely and cost- effective manner. An investment may be less liquid if it is not widely traded and such investments may experience significant deviations in pricing from their fundamental intrinsic value. As all bond market securities, Canadian fixed income instruments are subject to liquidity risk. Liquidity in the government of Canada and provincial bond market is relatively high, while liquidity in the Canadian investment-grade corporate bond market is moderate. Liquidity in the global high-yield bond market is poor to moderate. Liquidity risk will vary with changes in market tone and macro risk.

Canadian Fixed Income team

Aviva Investors Fixed Income Views

Disclaimer: These views are authored by various individuals within Aviva Investors.

Sovereigns’ state: Analysing the new challenges facing global sovereign bonds

13 Dec. 2024

The expected policies of a Republican administration in the US bring added uncertainty to the global growth cycle. Steve Ryder and Daniel Bright examine the probable impacts of a world with more tariffs and political strains.
40 years of lending lessons: How four decades in real estate debt has shaped Aviva Investors’ approach

12 Dec. 2024

From navigating market crashes to embracing ESG and technology, Adrian Poole and Gregor Bamert reveal how 40 years of real estate debt investing have moulded Aviva Investors’ strategy – and what it takes to stay ahead in a rapidly changing market.
Bond Voyage: A journey into fixed income

9 Dec. 2024

This month, we explore how US Treasuries are taking a breath, why 2025 could be the year of carry for high yield, what increasing dispersion means for emerging markets, and how surging M&A activity could affect investment-grade bonds.
Bond Voyage: A journey into fixed income

4 Nov. 2024

This month, our fixed-income investment teams discuss US elections, IMF meetings, US versus European high yield, managing declining rates for cash, and what the future might hold in store for gilts.
Bond Voyage: A journey into fixed income

10 Oct. 2024

In our October edition of Bond Voyage, our fixed-income teams reflect on US elections, US rates, France’s slide towards the periphery of EU issuers, and ESG considerations in Asia.
Bond Voyage: A journey into fixed income

16 Sep. 2024

This month, we discuss the books that inspired our investment teams over the summer.
Bond Voyage: A journey into fixed income

9 Aug. 2024

In this summer edition of Bond Voyage, we discuss topical themes in liquidity, emerging-market debt, investment-grade credit and global sovereign bonds.
Bond Voyage: A journey into fixed income

2 Jul. 2024

In a special European Championships edition of Bond Voyage, we discuss topical themes in liquidity, emerging-market debt, investment-grade credit and global sovereign bonds (with a little help from Cristiano Ronaldo and Kylian Mbappé).
Bond Voyage: A journey into fixed income

10 Jun. 2024

This month, we discuss fiscal discipline in emerging markets, investment-grade credit portfolio construction, potential opportunities for sovereign investors in Canada and the merits of a developed-market focus in global high yield.
Bond Voyage: A journey into fixed income

13 May 2024

This month, we discuss Spring Meetings and the path for rates.
Bond Voyage: A journey into fixed income

9 Apr. 2024

In the April edition of our monthly series, we explore the latest developments in fixed-income markets.
Bond Voyage: A journey into fixed income

11 Mar. 2024

In the latest instalment of our monthly series, our investment-grade, high-yield, emerging-market and global sovereign bond teams explore the key talking points in fixed income.
Bond Voyage: A journey into fixed income

7 Feb. 2024

In the latest instalment of our monthly series, our investment-grade, high-yield, emerging-market and global sovereign bond teams look ahead to the key themes that are likely to shape fixed-income markets in 2024.
The tide turns: The outlook for fixed income in 2024

31 Jan. 2024

After a challenging period for fixed-income markets, conditions look to be right for a better year in bonds.
Bond Voyage: A journey into fixed income

12 Jan. 2024

In this new year instalment of our monthly series, our investment-grade, high-yield, emerging-market and global sovereign bond teams share their fixed-income resolutions.