Lowering Fees and Strong Performance from Bonds

 
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By Miles Clyne

The benefit to clients in dealing with a portfolio manager vs. a traditional advisor is we get to aggregate investments to get a better price for all of our clients, regardless of the size of their individual accounts. This can be significant, especially in sectors like bonds that can have lower expected returns compared to other investments like stocks.

As an example, our clients own the NEI Global Total Return Bond fund as part of our bond strategy.  NEI recently created a separate class of the fund that allowed for the aggregation of all our clients’ holdings in this fund to qualify for an overall lower fee. Lower fees will immediately increase the net return to clients. Fees dropped by 20 basis points or .2%.  In a world where low interest rates are expected to be the norm going forward, any drop ads value and is appreciated.

The NEI Global Total Return Bond fund has been a great investment in the bond category of investments. The table below is from Morningstar. They have consistently performed above the average bond strategy and have generated a year-to-date return of 10.33% as of August 28, 2019. Pretty nice return for a boring bond manager.

 
Source: Morning Star

Source: Morning Star

 

I tell clients that our bond strategy is the “safe” part of their investments. What we expect is stability and in a low interest rate environment, expect low returns. I stand corrected. The average investor would have been far better off over the past 5 years investing in our bond strategy than investing in the S&P/TSX Composite, and especially over the past year. 

Source: SIA Charts

Source: SIA Charts