Terry Carr, manager of the Manulife Corporate Bond Fund, took your questions in a live one-hour discussion Friday, May 27. Mr. Carr's $838-million fund, which is split between investment grade corporate bonds and wilder high-yield issues from Canada, the United States and elsewhere, is top-ranked by Lipper.
It has returned 8.3 per cent over the past 12 months, and in 2009, it returned an amazing 25.2 per cent. And when the stock market was melting down in 2008, cutting major indexes in half, the fund turned in a comparatively slim loss of just 8.3 per cent. (Read more about Mr. Carr here )
Mr. Carr shares his strategy on making big - yet relatively safe - returns from the bond market and provide insight on how your portfolio could benefit.
The following is a full transcript:
11:02 Darcy Keith - Good morning everyone, I'm Darcy Keith, an editor with the Globe and Mail. Welcome to this live discussion.
11:03 Darcy Keith - Terry Carr, manager of the Manulife Corporate Bond Fund, will be joining us in just a moment.
11:03 Darcy Keith - To read more about Terry and his approach to bond investing, please click here.
11:04 [Comment From Terry Carr]/b>
11:07 Darcy Keith - Thanks for joining us Terry, this should be a great discussion. Just to start off Terry, I'm wondering what your general view is on interest rates in Canada. Do you see the Bank of Canada hiking this summer?
11:08 [Comment From Terry Carr]/b>
It's my pleasure to be here. I think that the Bank Of Canada will be cautious about raising rates and is likely to begin a gradual campaign in the fall
11:09 [Comment From Kesh Malik ]/b>
In a possible rising interest rate environment, is it still possible to make good returns with bonds?
11:10 [Comment From Terry Carr]/b>
Yes but it is obviously more difficult. Corporate debt and high yield will be preferred over government debt with care given to maturities of the bonds
11:10 [Comment From Don ]/b>
Terry, where do you see the best opportunity right now in terms of either sectors or ratings?
11:11 [Comment From Terry Carr]/b>
Generally I would say that the best opportunities lie in BBB rated corporate debt and carefully selected high yield rated bonds.
11:11 [Comment From Joe R ]/b>
I'd like to buy and hold long-term corporate bonds until maturity to maximize my return. But is this possible if I purchase a bond fund rather than an individual bond?
11:13 [Comment From Terry Carr]/b>
Generally the buy and hold approach is not consistent with an active bond managers strategy because we try to add value beyond buy and hold. But exposure to intermediate and long term bonds is typically maintained but the specific holdings tend to vary over time
11:13 Darcy Keith - Just a follow up question related to this:
11:13 [Comment From BBB+ ]/b>
Good question by Joe. Do any of the bond ETFs hold their bonds to maturity? Sometimes difficult to tell from reading the prospectus.
11:15 [Comment From Terry Carr]/b>
ETF's will definitely be closer to buy and hold but will suffer from an "index less the MER fee" detriment. Hence won't out perform the asset class they represent
11:15 [Comment From Garth Doll ]/b>
Where do you see the better higher yield opportunities in today's markets - converted income trusts who have maintained yield, or higher yield corporate debt?
11:16 [Comment From Terry Carr]/b>
I would be a little bit cautious of the converted trusts initially because of their relatively new nature. Additionally, secondary market liquidity can dry up quickly
11:16 [Comment From Marc R ]/b>
What sectors of the High Yield market do you favour?
11:17 [Comment From Terry Carr]/b>
Generally we look for less cyclical sectors whose companies produce steady cash flow...
11:18 [Comment From Terry Carr]/b>
but I would say that when you are just emerging from a recession, if you can pick the survivors that are cyclicals, that is where the most money is made
11:18 [Comment From yield ]/b>
Is the preference for BBB a relative call within all of corporate credit? Investment grade credit spreads sit around 80bps; high yield is at or close to all time tight in terms of credit spread
11:20 [Comment From Terry Carr]/b>
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