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Aventine launches stable income fund

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Aventine Asset Management has launched the Aventine Stable Income Fund, a multi-strategy income fund that invests in bonds and preferred shares, operates a covered call equity strategy and provides exposure to hybrid income securities such as convertibles and equity linked notes.

The initial round of capital raised in the fund was led by Aventine’s directors and portfolio managers as well as a select group of Canadian investors and corporations. Subsequent closings will take place on a weekly basis.  
 
The fund’s objectives include annualised net returns of between 7 per cent and 10 per cent, annual portfolio yield of between 3 per cent and 6 per cent, and low to medium volatility risk. The fund is expected to qualify as an eligible investment for registered plan accounts.
 
Aventine says the fund is ideal for Canadian income investors who desire capital protection through a rising interest rate environment and place high importance on stable, low volatility performance, but who also require stronger returns than depressed bond yields currently offer.
 
The fund’s management team, led by Andrew Shortreid (pictured), president and chief investment officer, features nearly 50 years of experience in the fields of portfolio management and strategy, investment analysis, private equity and business valuation.  
 
“With both high equity market valuations and rising interest rates, income investing is about to get very challenging for the average investor,” says Shortreid. “There are considerable headwinds facing the types of passive income strategies which have become very popular over the past several years. The playbook is changing and we think there are some tremendous opportunities for investors who take a more strategic approach to income portfolio construction. This means incorporating some traditionally under-owned asset classes like convertible bonds and rate-reset preferred shares which offer attractive yield spreads and provide upside potential in an inflationary environment marked by rising nominal yields. Additionally, we think that a covered call dividend growth strategy, which tends to work extremely well when market valuations are on the high side, will significantly outperform a long-only dividend portfolio over the next two plus years.”
 
“This isn’t a new strategy for Aventine,” says James Telfser, partner and portfolio manager. “Andrew has been running this mandate since 2009 on a segregated basis and has had great success while taking very little risk. The Aventine Stable Income Fund is a creative, elegant and unique solution to a major challenge facing investors. As a fund manager you’re always looking for an edge and in the case of this fund we have a couple big advantages. First, we are a perfect size to exploit inefficiencies in less liquid income asset classes like preferred shares and convertibles and second, we’re profiting from systematic investor biases with our covered call and structured notes strategies to deliver consistent, tax-efficient returns. 2017 is the right time for us to introduce this sensible approach to a wider audience, which is why we decided to launch the Aventine Stable Income Fund now.”

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