CI Investments Inc. Friday announced the launch of Signature Diversified Yield Fund, an income solution designed to provide enhanced yields and access to new opportunities in high-yielding asset classes.

“With interest rates at historic lows, income investors need to generate higher returns without taking on excessive risk,” says Peter Anderson, CI chief executive officer. “This fund is designed to meet that need, taking full advantage of a diversified approach and the expertise of the Signature portfolio management team.”

Signature Global Advisors is CI’s largest in-house portfolio management team, with assets under management of over $23 billion, including one of the biggest pools of high-yield securities in Canada.

The investment objective of the new fund is to achieve tax-efficient returns through exposure to a portfolio of fixed-income and high-yielding equity securities throughout the world. These include high-yield corporate bonds, real estate investment trusts and other securities in the real estate, infrastructure and telecommunications sectors.

“The sectors we are targeting all suffered during the credit crunch. In many cases, their stable cash flows induced a high level of debt, which now needs to be addressed,” says Eric Bushell, chief investment officer of Signature Global Advisors and lead portfolio manager of the fund. “As these sectors reorganize, and confidence and asset values recover, we see excellent opportunities for growth, as well as compelling yields.”

Bushell explains that the fund provides exposure to a wide range of high-yield securities that are generally not accessible to non-institutional Canadian investors.

“In Canada, with the income trust sector shrinking significantly, there is reduced choice for investors seeking higher yields beyond a limited selection of dividend-paying equities,” he says. “Canadians who wish to benefit from higher-yielding asset classes must invest globally and, in doing so, they should ensure that they entrust their savings to portfolio management teams with sufficient resources to manage these asset classes. Signature Diversified Yield Fund is managed by a team of experts, who are specialists in their sectors on a global basis.”

The fund will pay monthly distributions at an initially targeted rate of 6% per year. Unlike most other income mutual funds in Canada that pay distributions that are taxed at the highest rates, Signature Diversified Yield Fund will use forward agreements to obtain its market exposure. As a result, the fund’s distributions will typically be in the form of either capital gains or returns of capital. These distributions will be tax-efficient because capital gains are taxed at a lower rate than interest income and returns of capital generally are not subject to tax (but will reduce the adjusted cost base of units held by investors, and returns of capital paid after the adjusted cost base has been reduced to zero will be taxed like capital gains).

The fund also provides protection from changing currency values through active hedging by the Signature team.

“In addition to income investors, Signature Diversified Yield Fund is a suitable option for people who are seeking an alternative to holding cash but remain concerned about volatility in the equity markets,” Anderson adds.

The fund is also available as Signature Diversified Yield Corporate Class, which will not pay a monthly distribution but offers the tax benefits of the CI Corporate Class structure.

IE