Fund won’t repeat top performance
You won’t often find a fund manager saying that performance is going to worsen, but here’s an exception.
The Phillips, Hager & North High Yield Bond Fund had a gain of 19.7% in the year to June 30, but one of the managers confided to me that it is “mathematically impossible” for that kind of return to be duplicated in the coming 12 months. The reason: the very wide spreads between corporate issues and government bonds have narrowed recently, which has resulted in windfall profits for all funds of this type. The manager described the past year as “an anomaly”.
So what’s the outlook for this fund? “I would say that 8% is a number I can live with for the next year,” he said. “Going forward, an 8% to 9% annual return is a reasonable target over the longer term.