CI Alternative Investment Grade Credit Fund

Celebrating five years of our alternative fixed income solution

In November 2023, CI Alternative Investment Grade Credit Fund reached an important milestone. Having celebrated its five-year anniversary, the fund now has a track record lengthy enough to demonstrate a streak of consistent positive total returns. Given the trend of more Baby Boomers transitioning to partial or full retirement, the desire for a reliable and steady income stream is greater than ever.

We’re pleased with how the fund has performed over the past five years, but before we dive into the numbers, let’s take a look at what this fund is all about and which type of investor it may appeal to.

What is CI Alternative Investment Grade Credit Fund?

The fund is an alternative fixed income strategy focused on enhancing yield relative to conventional fixed income solutions. By maintaining low duration and default risk, as well as low correlation to traditional equity and fixed income markets, the fund may help reduce portfolio volatility. It aims to generate consistent positive total returns with an emphasis on capital preservation, utilizing tools like leverage, short-selling and derivatives to capitalize on opportunities unavailable in traditional fixed income mandates.

What type of investor might want to consider this fund?

If you’re looking for an income solution with the potential for long-term capital appreciation, and you have the ability to tolerate a low-to-medium level of risk, consider CI Alternative Investment Grade Credit Fund. We believe this fund may also be suitable for fixed income investors who seek:

• To reduce sensitivity to fluctuations in interest rates
• Exposure to global investment-grade credit and active credit trading strategies
• Consistent returns (i.e., less volatility) over the course of a market cycle
• An investment that, when circumstances are appropriate, can employ borrowing, short-selling, leverage and derivative strategies, either to maximize returns or mitigate negative returns

A look under the hood

It’s often true that a picture is worth a thousand words, and that “the proof is in the numbers.” In keeping with that spirit, let’s consider some key metrics to see how the fund has fared over its first five years.

• Performance relative to the benchmark index. As you can see in the following chart, the fund’s annual total returns compare favourably with its benchmark.

Trailing Performance

Source: Morningstar Research Inc., Bloomberg Finance L.P., as at November 30, 2023. *Common inception (C.I.) on Nov. 7, 2018.

• Performance versus major fixed income ETFs. In addition to strong annual returns relative to the benchmark index, this fund has outperformed its well-known core fixed income ETF competitors.

Trailing performance since inception

Source: Morningstar Research Inc., as at November 30, 2023. Chart shows cumulative total returns on a weekly basis while table shows annualized total returns on a daily basis. Common inception is Nov. 7, 2018. XCB is used as a proxy for FTSE Canada All Corporate Bond Index, while XBB is used as a proxy for FTSE Canada Universe Bond Index.

• Yield and standard deviation. As discussed earlier, the fund aims to enhance yield and lower volatility. The chart below illustrates how the fund generates attractive relative yield without taking excessive risk.

Yield and Standard Deviation since 2018.11.07

Canadian Bond Universe = FTSE Canada Universe Bond Index; Passive Corporate Bonds = FTSE Canada All Corporate Bond Index; High Yield = ICE BofA U.S. High Yield Index. Sharpe Ratio uses FTSE Canada 91-Day T-bill as risk-free rate except for High Yield, which uses USD risk-free rate (Average 3-month US T-bill).

Source: Morningstar Research Inc., Bloomberg Finance L.P., as at November 30, 2023. Yield is yield to maturity for Canadian Bond Universe, Passive Corporate Bonds and CI Alternative Investment Grade Credit Fund; yield to worst is for High Yield. Standard deviation is calculated using daily returns in base currency from Nov. 7, 2018, to Nov. 30, 2023.

A modern strategy for fixed income investors

As the focus on creating regular cash flow continues to grow, CI Alternative Investment Grade Credit Fund may be a compelling solution for income-oriented investors looking for a different way to enhance returns while managing the level of risk. We designed the fund to take advantage of an attractive opportunity set presented by gaining access to a range of sophisticated, alternative fixed income securities that are typically unavailable to the average retail investor.

If you’re interested in learning more about whether CI Alternative Investment Grade Credit Fund (Series F fund code: 4190) could be a good fit for the fixed income portion of your investment portfolio, please contact your advisor or visit our website for more information.

Glossary of Terms:

Correlation: A statistical measure of how two securities move in relation to one another. Positive correlation indicates similar movements, up or down, while negative correlation indicates opposite movements (when one rises, the other falls).

Derivatives: A financial security with a value that is reliant upon, or derived from, an underlying asset or group of assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its price is determined by fluctuations in the underlying asset.

Duration: A measure of the sensitivity of the price of a fixed income investment to a change in interest rates. Duration is expressed as number of years. The price of a bond with a longer duration would be expected to rise (fall) more than the price of a bond with lower duration when interest rates fall (rise).

Leverage: An investment strategy of using borrowed money - specifically, the use of various financial instruments or borrowed capital - to increase the potential return of an investment.

Sharpe Ratio: A risk-adjusted return measure calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe Ratio, the better the portfolio's historical risk-adjusted performance.

Short selling: When a portfolio manager believes a security will decline in price, they may decide to borrow and sell a given asset in the hope of being able to buy it back for a lesser price and return it to the lender at some future date.

Standard Deviation: A measure of risk in terms of the volatility of returns. It represents the historical level of volatility in returns over set periods. A lower standard deviation means the returns have historically been less volatile and vice-versa. Historical volatility may not be indicative of future volatility.

Volatility: Measures how much the price of a security, derivative, or index fluctuates. The most commonly used measure of volatility when it comes to investment funds is standard deviation.

Yield to maturity (YTM): The total expected return from a bond when it is held until maturity – including all interest, coupon payments, and premium or discount adjustments.

Yield to worst: a measure of the lowest possible yield that can be received on a bond with an early retirement provision.