The Manager's Commentary - November 30, 2009

The corporate bond market saw little movement, from a spread perspective, during the month of November. Neither the High Yield nor the Investment Grade corporate bond market changed in spread over the course of the month; finishing at 770 basis points and 220 basis points over treasuries, respectively. As default rates are forecast to drop over the course of 2010 from the current 12% rate to 4%, corporate bonds should continue to provide exceptional value.

We acknowledge that forecasts are there to be broken and have no interest in playing the “beta” game of riding the lower rated credits like some of our peers. However, please don’t think that this will “hamstring” us from a portfolio perspective. While many of you know, the mission of having a smaller fund will afford us the opportunity to harvest returns from bonds that are “off the beaten path” and, in many cases, provide superior risk adjusted returns.

At month end the fund was quite short in duration with approximately 30 percent of the fund coming due in the next 9 months. During November, the fund purchased 2 new issues but the majority of investing in the portfolio was just adding to existing investments like Groupe Aeroplan, Harvest, MI Development, and Chesswood.

At the time of writing this update, the fund has purchased two very attractive corporate bonds which we will highlight in the New Year.

Matthew Shandro
November 30th, 2009