WS Keyridge Diversified Monthly Income

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.

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.

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.