WS Canlife Diversified Monthly Income

A diversified portfolio of income-generating assets, including global company shares, international government and corporate bonds, as well as property. This fund aims for a yield of a least 4% while targeting a minimum monthly income to the investor. The fund is part of a wider range of multi-asset solutions focused on matching investment returns to a defined level of risk.

Our opinion

This is a steady offering with income generation at the centre of its process. The managers use the plentiful resources at their disposal from the wider group at Canada Life to build their asset allocation. The fund targets businesses with strong revenue generation, giving it the best possible chance to continually provide real growth in both dividends and capital. The fund also has a strong risk management process which combines top-down asset allocation with bottom-up stock selection. Performance since launch has been strong.

Company description

Canada Life Asset Management manages £39.6bn in fixed income, equities, UK property and multi-asset solutions. The firm is part of a UK-based subsidiary of the Great-West Lifeco group of companies, which has operations in Canada, the United States, Ireland and Germany. Canada Life Asset Management comprises over 100 individuals, with over 50 experienced investment professionals with almost 20 years' average industry experience.

Parent company Great-West Lifeco is the oldest Canadian life assurance company, tracing back to 1847. The firm has total assets under administration of £1,670bn.

Fund manager

Craig Rippe joined Canada Life Asset Management in March 2004. He became head of UK equities in March 2010 and was appointed head of multi-asset funds in May 2018. He previously managed income funds at Govett Investment Management Limited and prior to that worked at Deloitte Touche. Craig has a BSc in Mathematics from Warwick University. He is a Chartered Accountant and a CFA Charterholder.

Jordan Sriharan joined Canada Life Asset Management in 2021 as a fund manager on the multi-asset team. He was previously head of the Managed Portfolio Service at Canaccord Genuity and prior to that worked at Mercer, managing corporate pension schemes. Jordan has an MSc in International Economics from City University and a BA in Economics from the University of Sheffield. He is also a CFA Charterholder.

Craig RippeFund manager

Investment process

The fund's investment process is designed to support its aim of paying a steady monthly income by finding the optimal balance between income and capital growth opportunities (the fund avoids the ideology of ‘yield at any expense'). The capital growth element should allow the fund to increase dividends each year, helping combat inflation while still offering consistency of income.

To achieve this balance between income and capital growth, the investment process continually assesses for the relative value in allocating to the highest-yielding assets. This means the fund is not concentrated in (for example) high yield bonds or heavily reliant on equity sectors conducive to high dividend payers. By focusing on multiple factors within the process and using a more unconstrained approach to security selection, the fund can aim to maximise returns on a risk-adjusted basis.

The process starts with the strategic asset allocation process (a portfolio strategy whereby the investor sets target allocations for various asset classes and rebalances the portfolio). This takes place once a year, but is reviewed on a quarterly basis should investment cases change.

The investment process is both top down (focusing on macro factors of the economy, such as GDP) and bottom up (evaluating individual companies and sectors).

The top-down element allows the input of the wider asset management business at Canada Life Asset Management. This includes the head of equities, fixed income and property inputting their views into the quarterly asset mix meeting. This meeting covers the likes of current economic conditions, economic outlook, geopolitics, topical issues, asset class valuations and market conditions .

This is followed by the multi-asset allocation meeting, which takes those inputs and then builds what the portfolios needs to gain exposure to (factor, sector, region, credit ratings) based on the views from the wider investment team. This meeting looks at positions relative to the mandate and its peers, changes to the portfolio, proposed allocations and implications of allocations when reviewing the portfolio.

Teams sit alongside the managers every day, something the group feels helps them make real-time investment decisions on asset allocation.

There are also bi-weekly meetings where global equity and bond managers provide inputs (shorter-term views) and why they may be relevant to the Diversified Monthly Income fund. All global equities within the equities bucket of this portfolio will be held within other funds at Canada Life Asset Management, while the same is true of the high yield and investment grade bonds held in the fixed income segment of the portfolio. Craig and Jordan manage the alternatives element of the portfolio themselves.

The final portfolio tends to hold between 110-130 holdings.

ESG

ESG – Integrated

An ESG overlay is input through all of the stock selection process – deterioration in the ESG characteristics of a company is a valid reason for the team to sell a holding. Many of the equity and bond holdings are held in the global equity and bond funds run by the asset manager. These managers also run money for the life insurance parent of the business, which has strong ESG protocols in place. This includes being aware of UN Global Compact Rules, and not investing in companies which fall foul of them, such as coal. In addition, part of the underlying work by strategy specialists on the equities side is to make sure they are engaged on the voting front. They all analyse E, S and G credits individually.

Risk

Risk management is interwoven throughout the process. Craig and Jordan’s job is to be the risk managers on the fund while taking bottom-up ideas from sector specialists. They also have to make sure the fund is aligned to its objectives, income and volatility band. The fund aims to keep alignment to its respective risk profile through all market conditions and all time horizons set out by risk rating agency Defaqto. The fund also has a Dynamic Planner risk profile which is reviewed on a quarterly basis. The team does the same with their own in-house tool.

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