Canso Investment Counsel Ltd. is a specialty manager of Canadian corporate bond portfolios for some of Canada’s most sophisticated investors. We have been generating excellent returns since 1997 through our credit analysis and security selection (1). Our corporate bond team of five professionals has over eighty years of corporate debt, banking and rating agency experience. Our methods are not quantitative or fashionable. We spend a lot of time examining issuers and assessing their creditworthiness. Our long collective experience in credit analysis contributes to our ability to avoid overpriced and risky issuers. We do not avoid risk. We ensure that credit risk is priced appropriately and that our client portfolios are compensated for the risks they assume.
The Canso corporate bond portfolios range from AAA to distressed debt. We invest in issues that are undervalued given their credit risk and potential return. We tend to exploit illiquidity, buying when fear is prevalent and selling into enthusiasm.
Our contrary nature is tempered by our risk management discipline. Many years of investing in distressed debt has given us a substantial insight into the value of issuers after default. We have incorporated this into our research and look at the loss potential of each issuer prior to investment. We call this our Maximum Loss analysis and this limits the size of each position based on its potential impact on return.
Demand and supply pressures often move the market prices of corporate bonds to valuation extremes. We believe that this creates opportunity for our disciplined and value oriented approach to corporate bonds. From the highest rated issuers to those near default, our valuation discipline creates substantial risk-adjusted returns. It is not easy to invest when markets are paralyzed by fear and the financial press is filled with crisis and gloom. We have found these excellent times to find bargains in corporate bonds, as those who overpaid highly promoted and fashionable corporate bonds sell at cheap prices.
(1) Canso’s Investment Grade and Broad Corporate bond mandates are in the top quartile of the Pavilion ™ Performance Appraisal Report of Canadian fixed income managers since inception in 1997.