A corporate-bond specialist who focuses on relative value, Jennifer Hartviksen has a double challenge in front of her. Appointed last September as vice-president and head of fixed income at Trimark Investments, she has rebuilt the fixed-income team while restructuring the portfolios of several funds and aiming to improve performance.
"To turn around performance, we've added some new people to the team who have backgrounds in credit investing, like myself, and high-yield distressed investing," says Hartviksen, who works within a unit of Toronto-based Invesco Canada Ltd. "In my opinion, the best fixed-income analysts are often the ones doing the distressed-credit investing. It's easier to go up the ratings and quality spectrum than it is to go down."
New to the team is Isam Walji, who came from the Canada Pension Plan Investment Board, and Albert Ngo, a high-yield-bond specialist formerly with Scotia Capital Markets and the CPP Investment Board. They join Anthony Imbesi, vice-president, who has been with Invesco since 1999. Says Hartviksen: "Now that we have the right people, we are focusing on getting the right positions."
Turning to the $331-million Trimark Advantage Bond, Hartviksen has been making changes at a steady pace. For example, she sold a bond issued by Southern Pacific Resource Corp. STP a junior oil and gas producer active in the oil sands. "It has some fundamental operational issues. The credit metrics are rapidly deteriorating."
In its place, Hartviksen added a high-yield bond issued by Beazer Homes USA BZH, an Atlanta-based home builder. "We like the improving fundamentals of the industry," says Hartviksen. "The public builders over the last five years have done relatively well and survived, from a credit perspective, because of the counter-cyclical nature of their cash flows. When their income statements shrink, so do their balance sheets." Rated CCC, the 2023-dated bonds are yielding about 6.9%.
A Toronto native, Hartviksen is a 22-year industry veteran who has had a varied career since graduating in 1992 from University of Toronto with a BA in economics. Her first job was at the money manager Cassels Blaikie, where she spent a year as an assistant to a portfolio manager. She moved to Research Capital and worked for an equity analyst for one year. Then she spent two years as an analyst in the investment banking group at the brokerage Midland Walwyn.
In 1996, Hartviksen considered going to business school but instead relocated to Brazil after she and her husband, who works in market research, decided to seek their fortunes in Sao Paolo. "The chance to live and work in a different culture was a bigger opportunity than pursuing an MBA," recalls Hartviksen, who quickly became fluent in Portuguese.
Initially, Hartviksen worked for JPMorgan's investment-banking group. Then, in 1998, she joined ING Barings LLC and developed her skills as a sell-side analyst specializing in high-yield bonds. That move coincided with a string of financial calamities, starting with the Thai baht crisis. "It was a great front-row experience where I got a really good sense of volatility and dislocation," she says. "Those lessons served me well come 2007-08."
In 2000, Hartviksen and her husband moved to California. After a brief stint at SunAmerica Investments Inc., she worked for nine years at Western Asset Management, a prominent fixed-income manager based in Pasadena, California. As senior high-yield analyst, she was part of a team that managed institutional and retail assets.
In 2009, Hartviksen joined the CPP Investment Board and put together a market-neutral credit strategy for investment-grade and high-yield bonds. Two years later, she was hired by GMP Investment Management, a multi-strategy hedge fund, where she managed a portion devoted to corporate credits.
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At Trimark, Hartviksen believes there are opportunities to generate yield through owning lower-rated high-yield bonds and also through shorter duration. The duration for Trimark Advantage Bond is 3.02 years, while that of the $56.5-million Trimark Global High Yield Bond is 2.75 years.
"This year will be more about alpha. It will be as important for what you own, and for what you don't own," says Hartviksen. "If I had to put a tag-line on 2014, it would be 'Proceed, but proceed with caution.' That's largely a reflection of valuation: everything is priced for perfection."
Trimark Advantage Bond, rated two stars by Morningstar, was in the third quartile in 2013. It's in the fourth quartile over longer periods versus its peers in the High Yield Fixed Income category. The one-star rated Trimark Global High Yield has been either in the third or fourth quartile in the same fund category. Similarly, the $384-million Trimark Floating Rate Income has also been in the third or fourth quartile in the High Yield Fixed Income category.
Seeking to turn around the funds, Hartviksen is holding some so-called yield-to-call paper. One representative name is Tekni-Plex Inc., a privately held Pennsylvania-based maker of packaging for the consumer-goods industries that has restructured following bankruptcy proceedings. Its bonds are callable in June 2015.
"Given the improvement in the company's operating metrics and a high degree of certainty that it will take the bonds out next spring, we have very low duration exposure," says Hartviksen. Moreover, there is a healthy 3.5% yield, which is well above similarly dated treasury bills.
