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TriDelta Launches High Income Balanced Fund – for Accredited Investors

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hibfInitial Investments close November 30th

At TriDelta, we have watched closely as Canadians search for income in a low interest rate world.  One issue we have found is that many Canadian income funds are overly concentrated – with a heavy weighting in Canadian REITs (Real Estate), Canadian Financials, and Canadian Utilities.  This over concentration in a few sectors adds unnecessary risk to investors.

This month, we are proud to launch our High Income Balanced fund.  Initial investments will need to be in by the end of November.  This unique fund will feature a 6% annual target distribution, and will generate income and returns through a few diverse investment strategies.

  1. U.S. Stock strategy – We are using an options enhanced index strategy that has generated higher long-term returns by reducing (or minimizing) losses in a down market.
  2. Canadian Stock strategy – Manager has flexibility to invest in quantitative strategies and sectors offering best total return opportunities, enhanced by a variety of options based strategies to add tax efficient income. Because of the use of options we are able to generate income from all sectors of the market – not just traditional real estate, utilities and financial services.
  3. Enhanced Fixed Income – We are able to generate yields today of over 8% on conservative bonds.  Within our fund, we are able to borrow at just 1.65%.  This variable rate is based on a rate that is 0.65% plus the Bank of Canada Overnight Lending Rate, which is currently at 1.00%.  Outside of the fund, for individual accounts borrowing costs are currently at 4%.For example: We invest in a conservative BCE bond trading at par ($100) with a coupon of 3.95% & maturing in:

     

    Bond Interest 3.95%
    Spread on Borrowing 2.30% (3.95% – 1.65%)
    Spread on Borrowing $2 4.60% (2 times 2.30%)
    Total Income if we borrow $2 8.55% (3.95% + 4.60%)

    While the borrowing cost is variable, according to the latest from the Bank of Canada announcement, they now have a ‘neutral’ stance on growth, and we don’t believe there will be a meaningful rise in short term interest rates for some time.  There is also an additional opportunity to boost gains by investing in Global bonds with higher yields.

  4. Institutional Style Income Investments – We plan to add institutional investments that generate steady income.  These are pension-style investments in real estate or infrastructure that are not available to individual retail investors – usually because they require several million dollars from each investor.

 

Who Can Buy The Fund

This fund is available to anyone but with some hurdles.

If you are an accredited investor (this usually means your household has over $1 million of investable assets or your personal annual income is over $200,000 or household annual income is over $300,000), you can invest in the fund with a minimum initial investment of $25,000.

If you are not an accredited investor – the minimum initial investment is $150,000.

We are capping the initial investment at $500,000 per household.

Why Have We Launched a Fund?

As noted, there are a few investment strategies that we feel are very beneficial to our clients, but are more efficient or lower cost in a pooled fund structure.  These would include certain options strategies, the significantly lower borrowing costs which allow us to take advantage of advanced income strategies, and lower trading costs on larger bond transactions.

Investment Fees

The TriDelta High Income Balanced Fund is structured to benefit TriDelta clients.

For TriDelta clients, the fund itself will have a 0% management fee.  Clients will be charged a fee as per our current fee schedule.  This means that depending on the size of your household assets at TriDelta, the fee could range from 0.75% (for assets above $5 million) to 1.95% (for the first $250,000 of investment assets).  In certain cases, this will also make the fund fees tax deductible.

For those investing only in the fund (or with less than $250,000 of investments with TriDelta Investment Counsel), the management fee will be 2.00%.

There will be an administration fee within the fund for all investors that is capped at 0.50% per year.  This administration fee includes all trading costs as well as other costs to the fund such as legal and accounting.

It is worth noting that most funds managed with these advanced strategies have a fee of 2% PLUS what is known as a performance bonus, which can meaningfully add to the fees.  Our fund will have NO performance fees and for TriDelta Investment Counsel clients, will have a fee of under 2%.

Summary

The TriDelta High Income Balanced Fund will aim to add to income returns, with a 6% distribution target, and a goal of 6% to 10% long term returns (over a 5 year plus time horizon).  This fund is appropriate for those with a medium-high risk tolerance, and it is intended to be a good complement to your existing portfolio and goals.

If you are interested in learning more about the fund, please contact TriDelta Financial through your Wealth Advisor or through our offices in Toronto at 416-733-3292 x221 or in Oakville at 905-901-3429, so we can include you in our November 30th investment.

For more information on the fund, view our Fund Overview here.

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