Mawer Investment Management Ltd., highly regarded by Morningstar for its equity funds and its 
stewardship, has added a new dimension to its line-up with today's announcement of the launch of Mawer Global Bond.
The fund is by no means a market call on the part of Calgary-based Mawer, the Morningstar Analysts' Choice Fund Company of the Year in 2014 and 2013. Rather, it's recognition by the company that bonds represent by far the larger portion of the combined market capitalization of the world's stock and bond markets, and that global bonds should have a place in a diversified portfolio.
Like all other funds in the Mawer family, which now numbers an even dozen, Mawer Global Bond will be managed internally. The portfolio manager is James Redpath, who works primarily on research, management and trading of the firm's fixed-income mandates.
In addition to taking on the new fund, Redpath will continue as co-manager of Mawer Canadian Bond and its pooled-fund equivalent, along with Mawer Canadian Money Market. Before joining Mawer in 2010, he worked at ANZ Bank in New Zealand, where he was responsible for trading and managing the risk of the commercial-paper portfolio, fixed-income sales, and proprietary trading of currencies, fixed-income securities and derivatives.
Though Mawer has built its stellar reputation primarily on stock selection, macroeconomic analysis is an integral part of its investment process. In managing the global fixed-income fund, Redpath will draw heavily on the expertise of colleagues such as chief investment officer Jim Hall, deputy CIO Paul Moroz, and international equities manager David Ragan.
Mawer Global Bond's allocation among countries and currencies will reflect Mawer's research on economic growth and inflation, government spending and debt loads, international trade balances, financial institutions, the health and stability of social systems, and other macro criteria. "That's a big part of our process, which James can leverage and will help him with the global bond mandate," Moroz told Morningstar.
Unlike major global-bond managers, Mawer does not employ a team of credit analysts and currency specialists. That, and Mawer's decision to go with a high-quality, well diversified portfolio, explains the new fund's risk-averse strategy.
Or, as Mawer puts it in a presentation slide for its road show: "A really, really, boring fund." (This description echoes Mawer's aversion to investment fads and high-risk investments, as expressed in its trademark slogan: "Be boring. Make money.")
Mawer Global Bond's investment universe is something of a yawner, in that it will consist exclusively of government and government-related issues. The latter will include supranational organizations such as the International Bank for Reconstruction and Development. Canadian government issues will be held, provided that they're denominated in foreign currencies.
The fund may hold securities issued in emerging markets, though that portion of the portfolio will be limited to 15%. Other opportunities for yield pick-up will include foreign-currency bonds of regional issuers such as Canadian provinces or U.S. states.
Along with shunning all corporate bonds, the fund will invest only in investment-grade issuers. It will have a strong emphasis on higher-quality credit ratings, and on the world's major "reserve" currencies that are able to better hold their value during adverse market conditions.
Another risk constraint is that the fund's modified portfolio duration -- a measure of its sensitivity to changes in interest rates -- will be no more than eight years. The fund, notes Redpath, "isn't suitable for yield-chasers or currency speculators."
Mawer won't hedge any of its foreign-currency exposure back to the Canadian dollar. Instead, its strategy will be to place risk constraints on its exposure to any one currency.
The largest potential currency exposure is up to 75% in the U.S. dollar, followed by up to 50% exposure in any one of the euro, the Japanese yen or the British pound. The maximum for any other foreign currency is 15%, and the Canadian-dollar content is likely to be only as much as needed to manage its cash inflows and outflows.
One of the new fund's advantages is its modest 0.60% management fee for Series A, its lone retail series. The management expense ratio, which includes fund expenses and taxes, is likely to be around 0.75%.
Though not as cheap as some exchange-traded funds, Mawer's price point is well below the median in its asset category. This should help the fund provide a competitive risk-adjusted return, given that it will have a narrower scope of potential investments than most of its competitors.
The fund will be sold primarily through self-directed channels or through fee-based advisors. As with all Mawer funds, there are no trailer commissions or other dealer compensation paid out of the management fee.
