PDF Quarterly commentary
Portfolio Managers
Jeff Herold

Jeff Herold

Lead Manager

Dax Letham - JZechner

Dax Letham


Ian Claire - JZechner

Ian Clare


For investors seeking a relatively stable and secure return, fixed income provides a high quality, liquid component to a portfolio. To serve clients with unique needs and mandates, we approach fixed income with a robust, multi-strategy approach that has consistently generated low-risk, above-benchmark returns in all market conditions.

J Zechner Associates is widely recognized for our strong performance in fixed income. Our process stands apart for its rigorous credit analysis and taking decisive action when we believe sectors are over-valued.

An integral element of our multi-strategy approach is positioning the portfolio for anticipated changes in interest rates. Forecasting interest rate changes begins with a broad economic outlook, considering the pace of growth, the rate of inflation as well as North American monetary policy. What becomes interesting—and adds significant value—is predicting how markets respond to these shifts. We combine bonds with various durations to optimize yield and term structure as well as use our cash position strategically; an approach has positively impacted our returns.

Our team does in-depth research and analysis of the Canadian bond market, identifying sectors with strong relative value and selecting individual securities that meet our requirements for credit risk, covenant protection and liquidity. A notable aspect of our approach is that we do not overweight any sector thoughout an entire market cycle, but rather, adjust weights strategically as the cycle progresses. Issuers are selected on the basis of their business and financial risk profiles, management strength, growth plans and financial policies. Final security selection is based on relative value and its suitability within the strategic portfolio structure.

Preferred Shares

A distinguishing feature of our fixed income approach is our expertise in preferred shares. Institutional interest in preferred shares has been growing steadily in recent years, with good reason. Preferred shares offer three significant advantages when compared with traditional fixed-income investments:

  • Significantly higher yields than comparable corporate bonds;
  • Very low or no correlation with bonds; and
  • Lower historical volatility in most periods than either Canadian equities or bonds.

This combination of higher returns, lack of correlation and low volatility make a compelling argument for adding preferred shares to a well-balanced investment portfolio. In a low yield environment, where even modest yields are difficult to achieve without taking excessive risk, the incremental yields of preferred shares are compelling.

While these advantages are notable, finding value in the Canadian preferred share market can be challenging for passive index investors. We believe experienced, active management is essential to success. Our team brings a wealth of knowledge, discipline which, alongside our proprietary research, has resulted in a track record of success. Quite simply, we believe our preferred share team is the best in Canada. Our preferred share management can be part of a broader fixed income mandate, or offered in a standalone portfolio and a pooled fund.