Decision Making Process

The investment process at Canso begins with a thorough fundamental review of the issuer of a security by the analyst. A team meeting is then held to consider the issue or issuer in question. We encourage active participation by all investment staff and structure the meeting to allow a full and open discussion. Given the wide range of experience and analytical skill in our professional staff, we make it a priority to encourage debate and a complete assessment of important issues.

Before establishing a position, we evaluate the downside value of the security in a Maximum Loss analysis in our group discussion.This analysis captures the value that will be available to the bondholders and creditors in an insolvency and workout situation. Our experience with distressed debt is invaluable in this regard, as it allows us to fully understand the intrinsic value of a security in a negative scenario. We then size the position accordingly, not exposing too much of the potential portfolio excess return to any one credit.

Once our fundamental review is completed, the future cash flow stream from a security is identified and the risks associated with it are determined. An internal credit rating is then assigned to the issuer and a valuation is established by referring to other similar issuers and market pricing. The portfolio manager makes the ultimate buy or sell decision.

Weekly meetings are held to assess new information, although decisions are frequently made on an opportunistic basis between meetings. Issuers held in our portfolios are reviewed on a quarterly basis. When a corporate development arises, the analyst responsible will present their analysis and recommendation to the other team members who provide peer review and input. After the development has been thoroughly reviewed, the portfolio manager makes the investment decision.