Fixed Income Strategies
Fixed income strategies are designed for investors who prioritize income generation and capital preservation. By investing in high-quality debt securities, they aim to deliver more stable returns while helping to reduce the impact of market volatility.
Pembroke’s fixed income portfolios are actively managed with a focus on credit quality, income consistency, and risk control. Through careful selection of government and corporate securities, the strategies seek to balance yield opportunities with disciplined downside protection.
Fixed income strategies typically play a stabilizing role within a diversified portfolio, providing income, preserving capital, and helping to offset the variability of equity investments.
Within our fixed income approach, you can choose from a range of strategies with distinct income profiles, risk characteristics, and investment horizons.
Strategies
The Pembroke Canadian Bond Strategy is a core fixed-income strategy designed to deliver dependable income while emphasizing downside protection and long-term capital stewardship.
Strategy Overview
The Pembroke Canadian Bond Strategy invests primarily in high-quality Canadian bonds including federal and provincial government securities, high-quality corporate bonds (generally A-rated or better), and other debt instruments that meet Pembroke’s stringent credit standards.
What differentiates the strategy is its active, risk-aware approach to bond investing. Rather than relying on passive index exposure, the portfolio emphasizes disciplined credit selection, actively managed duration positioning, and a focus on limiting drawdowns during periods of market stress. The objective is not to maximize yield, but to deliver consistent income while reducing downside risk across market cycles. Protecting investor capital through market cycles is a central objective, making the strategy an appropriate foundation for conservative investors or for the fixed-income allocation within a balanced portfolio.
While the portfolio is anchored in Canadian bonds, the strategy has the flexibility to invest opportunistically outside Canada when attractive risk-adjusted opportunities arise or when diversification benefits are compelling. This flexibility allows the portfolio to access a broader opportunity set without compromising its core mandate of quality, income, and downside protection.
The Pembroke Canadian Bond Strategy is actively managed, with the portfolio constructed through active credit selection, relative value assessment, and disciplined management of interest rate exposure, with the explicit goal of improving downside outcomes relative to passive bond strategies. Duration and yield curve positioning are adjusted within a prudent range to reflect the manager’s assessment of market conditions, while credit exposure is selected security by security.
Pembroke retains overall responsibility for the strategy and has appointed Canso Investment Counsel Ltd. as sub-advisor, drawing on its long-standing expertise in fixed-income investing and deep capabilities in credit research and active bond management. Canso’s disciplined approach is implemented within Pembroke’s investment framework, emphasizing rigorous analysis, downside risk management, and long-term capital stewardship.
The strategy distributes net income on a quarterly basis, with any realized capital gains typically distributed annually. Distributions are automatically reinvested unless investors elect to receive them in cash.
Overall, the Pembroke Canadian Bond Strategy is designed to provide investors with a high-quality, actively managed bond portfolio that delivers income, preserves capital, and contributes stability to a broader investment program.
Who Should Invest?
The Pembroke Canadian Bond Strategy is suited to investors who prioritize income generation and protection against downside risk and who value professional management of interest rate and credit risk.
Ideal investor profile
- Investors seeking a conservative, income-oriented investment
- Investors with a low risk tolerance
- Investors focused on stability and limiting downside risk rather than capital growth
- Investors looking to reduce overall portfolio volatility
The strategy is particularly appropriate for investors in or approaching retirement, foundations or institutions with low risk tolerance, and individuals seeking a reliable source of income within a diversified portfolio.
Role within a portfolio
Within a broader portfolio, the Pembroke Canadian Bond Strategy may serve as:
- A core fixed-income holding anchoring a balanced or multi-asset portfolio
- A stabilizing allocation to offset equity volatility
- An alternative to GICs or passive bond exposure, offering diversification and active management
For investors already allocated to Pembroke’s equity strategies, the Canadian Bond Strategy can play an important role in managing overall portfolio risk and providing liquidity for rebalancing during periods of market dislocation.
For investors who might otherwise maintain a laddered bond portfolio, the strategy can serve as a more liquid and diversified alternative, offering liquidity weekly and at month end, professional credit oversight, and active interest rate management without the operational complexity of managing individual bond maturities.
Who Should Not Invest?
This strategy may not be suitable for investors seeking high returns or willing to accept higher levels of risk in pursuit of capital appreciation.
It is also not intended for investors whose primary objective is inflation protection, exposure to high-yield bonds, emerging market debt, or significant foreign currency risk, nor for those seeking a fixed or predetermined duration profile. Investors with very short-term liquidity needs may find the money market strategy more appropriate.
Pembroke classifies the Canadian Bond Strategy as a low-risk investment, consistent with its emphasis on investment-grade credit quality, diversified holdings, and active risk management.
Investment Strategy
The Pembroke Canadian Bond Strategy is managed using a disciplined, research-driven process that integrates interest rate management, credit selection, and portfolio construction. The objective is to deliver attractive risk-adjusted returns through income generation while preserving capital across market cycles.
Credit research and selection
Credit quality is central to the strategy. The portfolio invests primarily in high-quality bonds, with an overall emphasis on issuers rated A or better. These include Canadian federal and provincial governments, government agencies, and high-quality corporate issuers across a range of industries.
Canso’s credit team conducts detailed fundamental analysis of each issuer, assessing balance sheet strength, cash flow stability, business risk, and financial flexibility. The goal is to identify bonds that offer attractive yield relative to their credit risk, while avoiding issuers with deteriorating fundamentals or excessive leverage.
Interest rate and duration management
Interest rate exposure is actively managed as part of the overall portfolio construction process. The strategy does not target a fixed or static duration profile and is not managed to maintain duration in line with a benchmark. Instead, duration positioning is adjusted within a prudent range based on the manager’s assessment of interest rate conditions, yield curve dynamics, and relative value across maturities.
When interest rate risk is elevated, the portfolio may emphasize shorter-duration securities to reduce sensitivity to rising rates. Conversely, when longer-term yields are attractive relative to risk, duration may be extended to enhance income and potential capital appreciation. These adjustments are incremental and disciplined, avoiding extreme interest rate bets.
Yield curve and sector positioning
Beyond overall duration, the portfolio is positioned along the yield curve to capture relative value across different maturities. Allocations between short-, intermediate-, and longer-term bonds are adjusted based on where the team identifies the most attractive combination of yield and risk.
Sector allocation between government bonds and corporate credit is also actively managed. Government bonds provide liquidity and stability, while corporate bonds are used to enhance yield when credit conditions are favorable. The balance between these sectors reflects prevailing market conditions and relative value opportunities.
Risk management
Risk management is embedded throughout the investment process. Key elements include:
- Maintaining high average credit quality to limit default risk, with a meaningful allocation to governmental and government-related issuers
- Diversifying across issuers, sectors, and maturities
- Managing duration and yield curve exposure to control interest rate risk
- Maintaining adequate liquidity to meet redemptions and portfolio rebalancing needs
In addition, the strategy may hold cash and cash equivalents for liquidity management or defensive purposes.
Any foreign bond exposure, when utilized, will be denominated in Canadian dollars, ensuring that the strategy does not introduce foreign currency risk and remains focused on Canadian-dollar outcomes for investors.
A central aim of this framework is to limit drawdowns during periods of rising interest rates or widening credit spreads, reinforcing the strategy’s role as a stabilizing allocation.
The strategy’s success is measured relative to broad Canadian bond benchmarks, with the objective of delivering competitive income and total returns over time without materially increasing risk. Distributions are paid quarterly from interest income, which represents the primary component of long-term returns in a high-quality bond portfolio.
Accessing the Strategy
Investors may access this strategy by investing in the Pembroke Canadian Bond Fund. Additional information about the fund, including investment objectives, risks, fees, and expenses, is available in the fund’s prospectus.
The Pembroke Corporate Bond Strategy is an actively managed fixed-income strategy designed to generate income through investment in a diversified portfolio of corporate bonds and related credit instruments.
Strategy Overview
The Pembroke Corporate Bond Strategy focuses on delivering attractive risk-adjusted income by emphasizing fundamental credit analysis, disciplined portfolio construction, and active security selection across a broad range of credit instruments and issuers.
A central feature of the strategy is its valuation-driven approach to credit risk and portfolio construction. The Pembroke Corporate Bond Strategy is oriented toward the evaluation of corporate credit opportunities across sectors, issuers, and geographies, with exposure to corporate bonds, including lower-rated issues, increased only when credit spreads are judged to provide adequate compensation for underlying credit and market risks, including appropriate consideration of liquidity characteristics. When compensation for credit risk is unattractive, the strategy may reduce exposure to riskier corporate credits and allocate more defensively to highly liquid, high-quality government securities, including Government of Canada obligations, while maintaining flexibility to reposition the portfolio as relative value opportunities evolve. Through this approach, the strategy is designed to complement more conservative fixed income allocations by seeking incremental income opportunities while actively managing downside risk across credit cycles.
The strategy distributes net income on a quarterly basis, with any realized capital gains typically distributed annually. Distributions are automatically reinvested unless investors elect to receive them in cash.
Pembroke retains overall responsibility for the strategy and has appointed Canso Investment Counsel Ltd. as sub-advisor, drawing on its long-standing expertise in corporate credit research and active bond management. Canso’s research-driven approach is implemented within Pembroke’s investment framework and emphasizes rigorous issuer analysis, downside risk management, and long-term capital stewardship. The sub-advisor’s experience across multiple credit cycles supports a consistent and methodical investment process.
Who Should Invest?
The Pembroke Corporate Bond Strategy is suited to investors seeking enhanced income from their fixed-income allocation who value a flexible, actively managed approach to corporate and credit investing within a diversified portfolio.
Pembroke classifies the Corporate Bond Strategy as a low-risk fixed-income investment, consistent with its diversified structure, emphasis on fundamental credit research, and disciplined risk management approach. Its focus on corporate credit generally entails a higher risk profile than strategies invested primarily in government bonds.
The strategy may be appropriate for investors who:
- Seek income as a primary objective within their fixed-income allocation
- Are comfortable with moderate credit-related price fluctuations
- Value active management and professional credit oversight
Within a diversified investment portfolio, the Pembroke Corporate Bond Strategy may serve as a core corporate credit allocation within fixed income, complementing more conservative government-focused bond strategies or providing an actively managed alternative to passive corporate bond exposure. In each case, the strategy is intended to enhance income while maintaining disciplined risk controls through active credit selection and diversification.
Investors should be comfortable with the fact that corporate bond prices can be affected by changes in credit conditions, issuer-specific developments, and broader economic cycles. While the strategy is designed to manage downside risk, periods of market stress may result in short-term volatility. The strategy is not intended for investors seeking capital preservation comparable to money market or government-only bond strategies.
Who Should Not Invest?
This strategy is not suitable for investors seeking guaranteed exposure to corporate credit or fixed allocations to specific credit ratings or sectors, as portfolio positioning may shift materially based on relative value and market conditions.
It may also be inappropriate for investors seeking capital preservation comparable to money market or government-only bond strategies, or those unable to tolerate credit-related price volatility.
The strategy may also be unsuitable for investors seeking explicit inflation protection or real-return outcomes, as it does not target inflation-linked securities or real-rate benchmarks. Investors seeking a fixed or predetermined duration profile may also find the strategy unsuitable, as interest rate exposure is actively managed based on relative value rather than a static duration target.
Investment Strategy
The Pembroke Corporate Bond Strategy is managed using a disciplined, research-driven investment process that integrates credit analysis, portfolio construction, and risk management. The objective is to deliver attractive risk-adjusted income while managing credit and interest rate risks across market cycles.
Credit Research and Selection
Credit research is central to the strategy. The sub-advisor conducts detailed fundamental analysis of corporate issuers, focusing on balance sheet strength, cash flow stability, business risk, and financial flexibility. Issuer analysis emphasizes a company’s ability to service its debt obligations across a range of economic conditions.
Credit selection is driven by issuer-specific fundamentals rather than third-party credit ratings.
Relative value assessment plays an important role in security selection. The investment team evaluates credit spreads, covenant structures, and seniority within the capital structure to determine where value exists. Opportunities may arise when market sentiment or technical factors create pricing inefficiencies relative to an issuer’s underlying credit quality.
Portfolio Construction and Diversification
The portfolio is constructed to balance income generation with diversification, liquidity, and capital preservation, with the flexibility to adjust exposures across credit quality, issuer type, and geography as market conditions evolve. Position sizing reflects issuer-specific risk, liquidity considerations, and overall portfolio exposure. As a result, portfolio composition may at times look meaningfully different from traditional corporate bond benchmarks.
Interest Rate and Duration Management
Duration positioning is adjusted based on the investment team’s assessment of interest rate conditions, yield curve dynamics, and relative value across maturities. While credit selection is the primary driver of returns, duration management plays a supporting role in controlling interest rate sensitivity.
Risk Management
High-quality government securities, including Government of Canada obligations, play an integral role in the strategy’s risk management framework. They may be used both defensively, when credit markets do not adequately compensate for risk, and opportunistically, to maintain liquidity and portfolio flexibility as relative value opportunities in credit markets change.
Risk management is embedded throughout the investment process. Key elements include:
- Emphasis on fundamental credit analysis to limit default risk
- Diversification across issuers, sectors, and maturities
- Active monitoring of issuer fundamentals and market conditions
- Maintenance of adequate liquidity to meet redemptions and portfolio rebalancing needs
For investors seeking professional management of corporate bond exposure, the strategy offers a diversified and actively managed solution without the operational complexity of managing individual bonds. It can also provide liquidity and flexibility for portfolio rebalancing during periods of market volatility.
Accessing the Strategy
Investors may access this strategy by investing in the Pembroke Corporate Bond Fund. Additional information about the fund, including investment objectives, risks, fees, and expenses, is available in the fund’s prospectus.
The Pembroke Money Market Strategy is Pembroke’s most conservative investment offering, designed to prioritize capital preservation, weekly liquidity, and a dependable stream of interest income.
Strategy Overview
The Pembroke Money Market Strategy is intended to function as a cash-equivalent investment, offering stability and accessibility while earning a competitive yield from high-quality, short-term Canadian dollar money market securities.
While the strategy is permitted to invest in a range of eligible money market instruments, the portfolio is usually invested entirely in Government of Canada treasury bills, reflecting a conservative positioning focused on capital preservation and liquidity.
A defining feature of the strategy is its extremely short maturity profile. The portfolio maintains a low weighted-average term to maturity, in accordance with applicable Canadian money market fund regulations, resulting in minimal sensitivity to changes in short-term interest rates. As securities mature, proceeds are continually reinvested at prevailing market rates, helping the strategy closely reflect current short-term yields.
The Pembroke Money Market Strategy seeks to maintain a stable unit value, with income accrued weekly and distributed monthly. Distributions are automatically reinvested unless investors elect to receive them in cash. This design allows investors to earn interest without exposure to meaningful price fluctuations, making the strategy suitable for short-term holdings, operating cash, or capital awaiting deployment into longer-term investments.
Overall, the Pembroke Money Market Strategy provides a conservative, transparent solution for managing cash within an investment portfolio. It is designed to deliver modest income, preserve capital, and provide liquidity, rather than to generate long-term growth.
Who Should Invest?
The Pembroke Money Market Strategy is suited to investors who place the highest priority on capital preservation and liquidity and who require a stable, low-risk investment for short-term or transactional purposes.
Ideal investor profile
- Investors seeking a very high degree of capital stability
- Investors with very low risk tolerance
- Investors with short-term investment horizons
- Investors requiring immediate access to their capital
The strategy is appropriate for individuals, families, institutions, and organizations that need a secure place to hold cash while earning interest. It is particularly well suited for investors who cannot tolerate even the modest fluctuations associated with bond funds.
Role within a portfolio
Within a broader portfolio, the Pembroke Money Market Strategy may serve as:
- A cash allocation for liquidity and near-term needs
- A temporary holding place for funds awaiting redeployment
- A conservative anchor for highly risk-averse investors
- An alternative to high-interest savings accounts or very short-term GICs, offering weekly liquidity and professional management
Common use cases include holding proceeds from a business sale or asset disposition, setting aside funds for near-term expenditures, managing emergency reserves, or maintaining liquidity to take advantage of future investment opportunities.
Who Should Not Invest?
This strategy is not intended for investors seeking long-term capital growth or meaningful income above short-term interest rates. Over longer periods, money market investments may not keep pace with inflation. As a result, the strategy is best used as a short-term or cash-management tool rather than a core long-term investment.
Pembroke classifies the Money Market Strategy as low risk. This classification reflects the strategy’s emphasis on capital preservation, strict maturity limits, and its current positioning in Government of Canada treasury bills, which represent the highest level of credit quality available in Canadian dollar money market securities.
Investment Strategy
The Pembroke Money Market Strategy is managed within a highly disciplined framework designed to prioritize safety, liquidity, and income generation within narrow and conservative parameters. Given the nature of money market investing, the strategy emphasizes consistency and risk control rather than active return-seeking.
Short maturities and liquidity management
The portfolio invests in short-term money market securities, with maturities generally ranging from overnight to several months and a weighted-average maturity well below regulatory limits. At present, this exposure is entirely concentrated in Government of Canada treasury bills.
By maintaining short maturities, the strategy is able to respond efficiently to changes in short-term interest rates, reinvesting maturing securities at prevailing yields while avoiding duration risk.
High credit quality
Credit quality is central to the strategy. The portfolio is restricted to high-quality, short-term money market securities as defined by regulatory and internal standards. At present, the strategy is fully invested in Government of Canada treasury bills, eliminating exposure to provincial, financial institution, and corporate credit risk.
Income generation within conservative limits
Within its strict eligibility criteria, the strategy seeks to maximize interest income without compromising safety or liquidity. The portfolio manager evaluates relative value across eligible instruments and maturities, consistent with the strategy’s mandate and current positioning.
Adjustments to maturity positioning are incremental and disciplined. While the manager may modestly lengthen or shorten maturities based on interest rate conditions, the strategy remains firmly within the conservative boundaries required of a money market fund.
Income distribution and stable value
Interest income is accrued weekly and distributed monthly. Distributions are typically reinvested automatically, allowing investors to compound returns while maintaining a stable unit value. This structure provides transparency and simplicity, with returns delivered through income rather than price appreciation.
Risk management
Risk management is embedded throughout the investment process and is supported by:
- Strict limits on maturity and credit exposure
- Diversification across issuers and maturity dates, consistent with money market regulations and current portfolio positioning
- Emphasis on highly liquid securities
- Ongoing monitoring of credit quality and market conditions
The strategy does not seek to take advantage of leverage, complex instruments, or speculative opportunities. Its success is measured by its ability to preserve capital, maintain liquidity, and deliver income consistent with short-term interest rates.
Accessing the Strategy
Investors may access this strategy by investing in the Pembroke Money Market Fund. Additional information about the fund, including investment objectives, risks, fees, and expenses, is available in the fund’s prospectus.
