Episode 94: Explore the alternative route to your financial destination—Market Insights Monthly Special Edition

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Speaker 1:

Commentary is for general information purposes only. Clients should seek professional advice for their particular situation.

Macan Nia:

To really allow us to show you the Manulife story when it comes to liquid alternatives. And let's go back to the story. The backdrop is an environment post-COVID, above average inflation, above average interest rates, above average bond volatility. When you look at bond volatility over the last couple of years, you can measure various ways. One way is to measure it is the ICE Bank of America MOVE Index. Complicated way of saying it's an index that measures bond volatility. We have seen this index rise over a hundred percent over the last couple years. Increased volatility. Returns prior to 2023 were challenging.

And it's in this backdrop that we saw a plethora of introductions of Manulife... Or not Manulife, but of alternative fixed income strategies. What was the goal of these strategies? The strategies was to give them extra tools to help navigate this new environment.

Many of the new tools available, some of them include derivatives, some of them include liquidity management vehicles, so on and so forth. With the goal again, to enhance return while also reducing the volatility within the portfolio. Let's give a couple examples of these. So where you can use derivatives to take positions. If you wanted to extend duration or you wanted to shorten it, you can use derivatives to help enhance that return. Also, these tools can be used from a portfolio management perspective. When we talk about these liquidity management vehicles, one of the aims is let's say for example, you get a sell off, there's four sellings. Now if you have this tool available to you, you don't necessarily have to sell a position to fund cash flow. You can use this vehicle to help navigate that. Also, you can use this vehicle to take advantage of opportunities at the extremes.

And when we look at it today, you've seen the market has spoken. Flows is a great example. When you look at the alternative of fixed income strategy landscape over the past year in Canada alone, we've seen 1.2 billion net dollars flow into this space. And I think a lot of that has to do with there is this challenge today in this post-COVID environment when it comes to volatility with bonds and returns. And now we have the extra tools available to us to help navigate this environment.

Over the next half hour, 40 minutes. I'm joined by my two dear friends and colleagues, we'll start off with Roshan Thiru. Roshan Thiru is the head of Canadian fixed income at Manulife investment management and he is the lead head or portfolio manager of the new Manulife Alternative Opportunities Solution.

To Roshan's left is Chris Chapman, he's the head of the global multi-sector fixed income team here at Manulife Investment Management, and also he's the senior PM on the new Manulife Strategic Income Plus Solution.

Welcome gentlemen.

Roshan Thiru:

Thanks Macan. Thank you for having us.

Macan Nia:

Let's start with you Roshan. So again, we only have an half an hour, 40 minutes. Let's be respectful of everyone's time. I'm going to start off with both of you to start off with, in terms of give us a big brief overview, five to seven minutes of each one of your solutions. And I want you to also focus because the solutions your flagship funds are also very popular here at Manulife for their long-term track records. Contrast the two.

Roshan Thiru:

Yep. Thanks Macan. I'll give you an overview but it's not going to be too brief. So first of all, again Macan, I want to thank you for having us, and thanks everyone for joining us. And maybe I'll just start off by saying I'll talk about the mean objective of the fund and what the fund does. Generally speaking, alternative strategies, they aim to generate attractive returns with less correlation to the ups and downs of public market investments. That's what they do. So alternatives are really designed to reduce volatility through low correlations to traditional asset classes such as equities and bonds while minimizing drawdowns with an IT capital preservation or the holy grail of investing as I call it, the risk-adjusted returns. So what really is alternative opportunities fund or as we call it all-tops?

Well, it's a fund at its core will primarily be comprised of US and Canadian short investment grade, high yield hybrid corporate bonds as well as term loans and government bonds.I know that's a handful and a mouthful, I should say. What I'm trying to tell you is we are really going to be focusing on short corporate bonds largely in Canada and the US. And on top of it we are also going to be having the utilization of enhanced toolkit of alternative strategies to reduce the correlation to publicly traded risk and interest rate markets. So we are aiming to deliver an attractive total return within a lower volatility and a lower drawdown context, especially compared to the existing suite of funds that Macan referred to.

So the aim is to minimize negative skew and kurtosis. So in non-technical terms, what I'm trying to tell you is that our investors, we are aiming to deliver and lower drawdown and a smoother ride. We are in the business as you know very well, of generating reliable and predictable high income.

So there's no better vehicle than investing in short corporate debt. Period. Secondly, the US and Canada I would argue would be a safe haven, especially now to invest in the world where a world we are dealing with that's fraught with all sorts of geopolitical and economic risks. And even better, we have an enhanced toolkit to manage risk during times of volatility and enhance returns on top of it during market dislocations. So that in a nutshell is old ops.

And with respect to interest rate risk, how we will manage it. Traditionally we would use interest rate futures to reduce duration. However, in old ops we will have the flexibility to use futures to both reduce duration but at the same time extend duration. So the ability to use interest rate futures to extend duration and target the different points in the yield curve without the need to post-cash collateral.

I think it's a tremendously effective tool, especially in a falling rate environment, Macan. And with respect to credit, as you know very well, traditionally we have built our credit exposures through sector allocation process and fundamental analysis. However, old ops will give us the ability to supplement this with credit default swaps and options. So now we can use these tools for both hedging purposes and for adding risks synthetically with no cash cover required.

So in practice we'll use these derivatives to hedge high yield and investment grade exposure when we expect spreads to widen. But equally importantly, during periods of volatility when there's dislocation in the market, we can use these credit derivatives to increase credit exposure and quite rapidly take on source liquidity.

And lastly, in terms of managing liquidity, as you know, traditional funds rely on position sizing, diversification and cash management. We expect old ops to have the ability to manage liquidity through synthetic leverage and cash borrowing. In practice this means we don't have to sell good bonds at depressed prices to fund drawdowns during market downturn.

We'll launch the fund without the borrowing facility, but we expect to have it in place when we need to use them in the future. And I want to make an important point here. Given the elevated and inverted nature of the yield curve, we think it's more efficient to utilize synthetic leverage at this point rather than cash borrowing. But that said, there are environments where cash borrowing will be beneficial and we expect to have the ability to use the borrowing facility when we need it.

And how will we position the fund under various market conditions? So in late cycles we want to be adding duration, reducing risk, and supplementing liquidity sort of where we are in the market cycle now. And we will still want to be maximizing duration exposure and minimizing risk exposure as we enter recessionary environments.

And lastly, in early-mid cycle, we want to embrace risk to the max and we want to shorten duration posture. And now that we have this enhanced toolkit, we can effectively source liquidity, I should say two way liquidity. And that's highly beneficial, especially when it's tricky to source liquidity in the bond markets. And as you know, bond markets are over-the-counter markets. So there can be periods where there could be illiquidity. And at this fund, Macan, you asked the question, how is this fund different from other suite of products we offer for our clients, especially with regards to yield opportunities in the corporate bond fund? Old ops is very different from yield ops in that first of all, yield ops has equities, old ops will not have any equities and especially with regards to yield ops and corporate bond fund, those two funds focus on longer-dated corporates and old opportunities. We expect it to have much shorter corporate exposure, and that goes to long-term capital preservation and managing the drawdowns during a market dislocation.

That said, how is our team well-positioned to excel at managing the fund? I want to re-emphasize that we are not reinventing the wheel here. We have a long track record of offering income solutions that have delivered through various market environments.

So in terms of fundamental building blocks of old ops, in addition to the people who manage the fund and the process we follow, it's no different from what we do in our existing funds. And ultimately the PMs implementing a process that has withstood the test of time and it boils down to three words, valuation, volatility, and flexibility.

Now we are laser-focused on valuations, when valuations don't make sense we sell exposure. We thrive on volatility, market downturns create opportunities for us and we don't let a crisis go to waste. And lastly, we manage the fund to have flexibility so that we can take advantage of opportunities when they present themselves.

And the last point I would make is liquidity is always top of mind for us and to our clients. We really are super excited about this fund. Traditional funds, the way we have managed them this will not be any different. But having the enhanced toolkit, Macan, I can't emphasize any more how handy they become, especially during volatility in the market.

Back to you Macan.

Macan Nia:

Well thank you for that very comprehensive answer. Second, moving forward, please do not use kurtosis moving forward because we want to try to keep the thousand advisors engaged. But no joking aside, I think that was a really good overview of the Manulife Alternative Opportunity Solution. Now, Chappie or Chris, let's pass it to you in terms of give us a very brief five to seven minute overview of Manulife Strategic Income Plus.

Chris Chapman:

Yeah, thanks Macan. Roshan said a lot of the themes that you're going to hear repeated from myself. When we think about what's available to us being in the liquid alternative space, I think the key word is flexibility. Roshan said that word a lot. You're going to hear that a lot from me as well. When we think about what it is that we're bringing to the Canadian retail marketplace here with Manulife Strategic Income Plus. From my perspective, from the team's perspective, we really think about it as product extension. We think about what we run for other clients across our global client base. When we think about the tools that we're going to have, the additional tools, it's either going to be new tools to the toolkit or it's going to be increased ease of access to some of the tools in the kit. Well, they're not new tools to us.

This is just the first time we're able to bring them to the market here in the Canadian retail space as part of our product offering. So when we think about where does this fit, if we look at it's all global multi-sector as your starting point. That go anywhere, global bond fund where you have an investment opportunity set that is essentially all fixed income sectors, all geographies with an active currency piece.

If we think about what we have available here, we run the investment grade only. That's going to be a little bit more conservative. Historically we've had the flagship strategic income, that's going to be the kind of the core piece. And here across the product suite, we think about it from the perspective of a risk return profile. This is meant to be a little bit more of an aggressive product here in the Plus, and because we're in the liquid alts credit category, we think this is going to have a little bit more of a focus on the corporate side, on the spread product side.

And so we would anticipate that from the perspective of the risk return profile, we probably have a little bit more of an aggressive approach here. Maybe a little bit more of a volatility profile, a little bit higher than Strat here, but we would anticipate that hopefully we should have a commensurate return relative to that higher risk.

Now again, I mentioned the new tools in the kit, they're not new tools to us. Again, these are things we've been utilizing in other products for quite some time. What you get with the liquid alternatives is increased capability to access some of these tools, but you also can bring them to the market here in the product. Again, same investment team. We're using the same process, the same philosophy, the same macroeconomic starting point in terms of where we start across all these products, but really the increased flexibility, we always think about four risks.

You'll always hear us talk about interest rate, credit, foreign currency, liquidity. So maybe we'll kind of walk through how some of those are going to be different between Strat and Strat Plus across some of those. I'll start with currency. Here, it's really about taking advantage of some of the flexibility to do things like more easily access cross currency hedging. As folks know, we're always actively managing currency risk in our portfolio. In the existing strategic income generally that's going to be looked at more so from the perspective of the foreign non-Canadian bond relative to the Canadian dollar. With Strategic Income Plus we're going to have easier access to do that cross currency, which is what we can do there is think about that foreign currency exposure relative to all other foreign currencies as well, not just versus the Canadian dollar. There's going to be situations where you're going to have maybe a better risk profile, a better volatility profile, perhaps a better relative value opportunity set where you can do that cross currency, take Canadian dollar out of the equation.In that case you play foreign currency versus foreign currency.

The other thing we're going to have the ability to do within a Strategic Income Plus is take outright positions in FX. And again, this is a capability, it's not new to us. We've been doing this in other strategies since 2010, in terms of taking outright positions. Here, we can treat currency almost as an asset. And so we can do this through forwards and options, just take an outright view. Whereas in Strat, we're going to be structuring our currency perspective around owning a bond. So that's the FX piece. So a lot of enhanced flexibility.

Let's think about interest rate risk from the perspective of duration. In Strat, our duration range is going to be between two to six year. Here in ops it's going to be about zero to eight is going to be a range, a little bit of a wider range.As Roshan's touched on, one of the things that we do currently, we utilize bond futures. That's currently used from the perspective of hedging. Now one of the differences in the liquid alternatives category, you can use derivatives not just for hedging but also for investment purposes. And so that's one of the areas in terms of interest rate, risk management, duration management. Roshan's touched on this.

Instead of just going short to pull duration down, you have the ability to go outright long through bond futures, through the liquid alternatives category. Here you're taking advantage of being able to make derivatives use for investments. You're also utilizing some of the leverage capability. And so what that can allow you to do, if you see this to be the appropriate approach, instead of using your cash bond investment perhaps to say be in some of these higher quality global governments, you could utilize that cash allocation for other parts of the portfolio and then you can just use the bond futures overlay to get that exposure to high quality pieces of the market. And so you can accomplish that as well. That's again, one of the tools that you're able to do more easily through the liquid alternatives category.

And lastly, let's talk about from a credit perspective. Again, I've mentioned this product we anticipate probably have a little bit more of a credit focus. One of the ways that that might manifest itself is when we as a team have our kind of max positive view on credit risk, we can be a little bit more aggressive in Strategic Income Plus. Through the average portfolio credit quality, in the new product here it's double B minus or better. In the flagship strategy, it's triple B minus or better.

And so given our team view that time might not be right now, but at some point in the future when we deem that as the time to really become more aggressive in terms of your credit exposure, we'd have the ability to do that with that lower average credit quality in Strategic Income Plus.

So overall, again, as Roshan's kind of touched on, it's about having additional flexibility, additional tools in the toolkit. They're not new to us as a team. These are things we've been utilizing in some cases since the inception of the team. It's just we're really excited that this is the first time here in the Canadian retail space we're able to take advantage of all these and bring them to market in a new product.

Macan Nia:

Yeah, thank you for that. I think if it hasn't become abundantly clear, why has there been such growth in this field or this area of fixed income? It comes down to flexibility. It comes down to the tools. And I think people highlight that this environment is very uncertain. That's why you need these tools. The reality is every... I've been doing this for 15 years, same with you. The environment is always uncertain. It's just that the flavors are slightly different. And the key to these type of solutions is you have those tools available to you to take advantage of the uncertainty in the environment.

Let's transition. Let's go to a bit of a lightning round because we have roughly 15, 20 minutes left. And I'm going to ask each of you three questions. You did both a very good job of giving a very comprehensive overview of the solutions.

Let's go down one level. And this purpose of this webinar is not to get into the details of the positioning. The goal of this is really to get into the details of the structure of these new funds. We will have other webinars in terms of asking your macro views, the positioning, so on and so forth. But I think this is more of an education.

Many of you are familiar with Manulife Fueled Opportunities, many are familiar with Manulife Strategic Income. Well, let's learn about the new extension of those solutions. Let's start with you Roshan. Actually, this question is going to go to both of you.

So of the new tools available, and actually I should put a caveat in, the liquidity management tool will not be available to the teams at launch, but we anticipate it's going to be available in the very near future. So of the typical tools available, so we talked about derivatives for non-hedging purposes. We talked about liquidity management vehicles, so on and so forth, currencies, all these tools. Roshan, which one are you most excited about?

Roshan Thiru:

The simple answer, all of them. No, I'll tell you why. So think about it this way. Why am I excited about all of them? First of all, what do they make us do? They enable us to manage the fund better in terms of risk-adjusted returns. So they're enabling us to manage risk effectively. At the same time enhance returns. All of them are doing that. Interest rate futures are doing that, credit derivatives are doing just that.

So then the question comes down to, different market environments will enable us to use different toolkits. That's essentially what it comes down to. Now when interest rates are dislocated and highly volatile like they are today, in our view, is that interest rates... Our best case scenario is that they're going to continue to compress from here. So if that's your view and central banks are going to at some point start cutting rates, then using interest rate futures to extend duration is an effective tool, especially targeting different points of the yield curve. So that's exciting. Now, last year there was a period of time where interest rates were dislocated, but so were credit spreads. So if credit spreads are dislocated, it becomes an interesting tool as well.

So all in all, it's pretty interesting time to be using these enhancing toolkits.

Macan Nia:

Chris?

Chris Chapman:

Well, Roshan stole the good answer. I'm a little upset about that, because I was going to say the same thing. You can tell there's a lot of enthusiasm up here on the stage because of the flexibility. We often talk as a team about... Make the analogy if you're going fishing, you want to fish in as big of a pond as you can instead of just fishing in one little corner of that. Now we're fortunate, our global multi-sector approach kind of inherently already has that. With this new Strategic Income Plus under the liquid alts category, you enhance that pond even a little bit bigger. But not just that, you're adding more lures and whatnot into the tackle box.

So again, we love this stuff and so yeah, it's maybe the easy answer, but it's all of these tools. Again, these are all tools that we've been able to utilize elsewhere and so we're really excited to be able to bring them to bear here.

Roshan Thiru:

And Macan, I was just going to add, it's funny, Chris used the fishing analogy. I was going to say the late Charlie Manga used to say if you want to fish, you want to fish. The first rule of fishing is to fish where the fish are. So it's important to fish in a big ocean or you want to make sure there's lots of fish. And fixed income, as you know is teaming with fish right now.

Macan Nia:

I guess I'm going to play on that. If you're fishing the ocean, you need different tools, you need different lures, right? The lure in the river is very different than the ocean. We just came up with that right now. Okay, so let's move on. Actually, you mentioned something. Often pushback that I hear on the road is, okay when it comes to any one of these new solutions is, you haven't managed this before in the retail space. Chris, what makes you so sure that you can do it? And we already know the answer, you've been doing this, but give us an example of on the institutional side, you've been doing this for years.

Chris Chapman:

And I think that's what it is, right? And it's important to us as well that when we talk about this product that is part of it for us, is that it's not all of a sudden that we're going to be doing something totally different here. As a team running strategies for clients across the globe, both on the retail and institutional side, the tools that we're talking about, the things that have come up already. There are things that we've been utilizing in other client strategies for a long time in some instances, things like cross-currency hedging, basically since the inception of the team. And other stuff for almost 15 years, et cetera. So it's a longstanding, having done this, again, we're not doing anything different.

I think I'd also highlight within the liquid alts, it allows you expanded flexibility within derivatives usage for example. But if you've heard us talk before you know for our strategy, we don't really use a ton of variety of derivatives. So similarly here, we're not going to be using new types of derivatives versus what we already use. We're using bond futures, currency forwards, currency options. It's just that in this new product you have expanded flexibility in terms of how much of them you might use or maybe how you use them. But again, it's not doing anything different here.

Macan Nia:

Okay, so let's transition to you Roshan. In terms of the portfolio. I know we weren't going to go too much into the details of the portfolio, but what makes you most excited about the portfolio today in this type of environment?

Roshan Thiru:

Right, so I think you've heard me say this multiple times, these are exciting times for fixed income managers to go to work. Why do I say that? Because listen, we haven't seen government bond yields this elevated in 15 years. We haven't seen investment grade bond yields this elevated since the financial crisis of 2008. Irrespective of your view on inflation, I think we can agree two years ago, June of 2022, they peaked in the US at 9%. Now it's at three and a half percent. So it has come down substantially. And our view is that over the next 12 to 18 months, it's going to continue to come down. And again, irrespective of our views on central banks cutting rates, I think we can agree they're pretty much done hiking rates. And if your view is over the next 12 months, there's going to be cuts coming.

Fixed income. The macro environment for fixed income is an exciting place to be. And I've said this before, Chris and I, we are bond managers. By nature, we are not an excitable bunch. They get excited-

Macan Nia:

Really? You're very excitable. I would've never thought that.

Roshan Thiru:

Well, trust me, I'll have others say otherwise, but I get excited two, three times a decade. He gets excited once a decade. So my point is, listen, all jokes aside, my point is it is excellent time to be a fixed income manager. Where do we see opportunities? Folks, the short corporates, especially in North America, high yielding. If you look at the short high yield, one to five year high yield yielding 88.5%. If you look at investment grade in Canada, north of 5%, sometimes 6, 6.5% in certain instruments.

So these are golden times for us to go to work and crystallize those coupons. But what we didn't get going back in time over the last 10 years we are getting now is this extreme volatility. We are going through monetary policy tightening, quantitative tightening, and equity markets are sky high valuations. That means volatility is going to increase. So this is the best times to be using these enhanced tools to quickly source two way liquidity. And that's what we are doing with these funds. So as I mentioned before, it's exciting.

Macan Nia:

I think a couple of things there is, especially when you look at the bond landscape today in 2024, given the run up in yields recently, it's actually positioned you... Even, I find often when we talk about bonds to get that return profile, investors are quick to think you need a recession to unfold to get those mid to high single digit returns out of bonds. And the reality is when you're starting yield in high quality investment grade credit or sovereigns is five, where yields are today, all you need is a mere slowdown in the global economy or regional areas. A slowdown to see those yields come back. And that's when you get that high single digit return. And look at last year as a perfect example, as much as we would all love for the return profile to be consistent throughout the year, you get that high single digit return, it's 1% every month.

The reality is it's unlikely to be like that. There's a little bit of conviction, a little bit of patience involved. Look at last year, up until really October, Kevin and I and us, all of us were called idiots. "Where's the bond return? It's flat." And we got that bond return literally in two months. And the importance of patience is really in the numbers. Last year the Canadian bond universe measured by the DEX universe, was up 6.7% for 2023. If you miss the best five days to put that into context, there's 252 roughly trading days. It's not roughly, it's 252 trading days in a year. You miss the best five, your return went from 6.7 to 0.7.

The US example, the global bond example, you actually go slightly negative. So as much as we would all love to call the... It's impossible to call where you're going to get that near term attribution, but much more conviction in terms of when we look throughout 2024. That very similar to last year, I think bond investors are going to look on their statements and we're going to get a return that's probably much more, I shouldn't say much more, but it's above average than what we've been expecting.

Chris, let's go to you. I keep saying that, my apologies. This shows how close we are because I keep calling you by your nickname, but anyways... Are we not... I hear leverage.

Chris Chapman:

Yeah.

Macan Nia:

A retail investor might hear leverage. They might hear, "Oh my goodness, risk." So when you say leverage, does it make these products riskier or not?

Chris Chapman:

So I think leverage is something that we absolutely have to be very thoughtful about. I know that that's been the approach here when we think about it. Especially in the liquid alternatives category, because what the category guidelines would allow you to do actually is very wide range of what you could do. And what I would say from the prospectus perspective here, the strategies have written a bit more conservatively. So I'd say that as a starting point because yeah, you do have to be very careful. Leverage obviously can be an amplifier. We want that to be an amplifier of positive returns, but the world doesn't work that way always. And so you have to be aware and cognizant of the fact that that could be an amplifier for negative returns. And so think our approach to that collectively, I don't want to speak for Roshan, but I know we're thinking about this fairly similarly.

First of all, as I mentioned, the prospectus guidelines are a little bit more conservative. We are not going to be a permanently levered products. There are some other products out there in the liquid alts I believe that would kind of as part of their expectation of what the return profile might look like, it's taking into consideration a permanent leverage facility. That's not what we're going to be doing here with these products either.

As Roshan discussed, when that is available down the road, it's going to be more opportunistic. For that exact idea of, yeah, leverage can be risky. And so we want to be thoughtful about how we utilize that. I think we're going to be thoughtful about the implementation there, because it can go to both sides. But I think in terms of these strategies, we believe it's certainly been top of mind in terms of that approach and being thoughtful about how we would utilize that and how that component would feature in across all these other tools that we have available to us.

Macan Nia:

And then Roshan, maybe I'll end it with you because we're backing up on time here. We've talked about all these additional tools now available. My first response when I started learning years ago about these solutions is, "Well, why weren't they a part of the solutions to begin with 10 years ago?" And the reality is, it's regulation. And I'm going to get this wrong, but the National Instruments 81, 102 now allow, and I think the regulators have recognized that these type of tools help enhance returns while trying to mitigate the risks. So now you have as PMs the opportunity to use these tools. Of the two we talked about, give us an example where Roshan to you where over the past, let's say five years, where one of these tools actually would've been very helpful for you in a certain environment to help enhance return while minimizing risk.

Roshan Thiru:

Thanks, Macan. I think that's an extremely relevant question. So just go back to the pandemic. I'll give you a couple of scenarios under which we would've used it, going back in time. During the pandemic. Chris, or Chappie as we call him, and Macan I know these all too well. Especially when the markets were selling off high yield at sold off 25% at the peak of the market, sell off in early 2020, and equities had sold off 35% during the [inaudible 00:32:02] of the market sell off. If you wanted to source liquidity to buy bonds that are at steep discounts. Sourcing liquidity was tough to find, especially if you manage multi-billion dollar funds. If you have had the ability to use these derivatives, especially CDX-

Macan Nia:

Let me interrupt you there, CDX, for those that may not be familiar with it, what is a CDX?

Roshan Thiru:

So CDX is a credit default swap index. It's a collection, I believe it's about 100 or 125 names of high yield issuers, if it's a high yield CDX. Then investment grade CDX, it'll be a hundred issuers, individual credit default swap options written on them. They're about five years in duration.

Macan Nia:

Okay.

Roshan Thiru:

So it's a collection of swap options. So insurance, so to speak. So what we are trying to do is we would, in essence, during the sell-off, we would've used CDX to go long credit without having to worry about sourcing liquidity in the market, which was very tough. So that would've been one instance.

And just take last year, for example, between June and October during that time, interest rates went out 140 basis points. We wish we had used... We were using interest rate futures to shorten duration, but at the same time, within a two, three month period from October to December, they came in 120 basis points. To answer you, to go back to your earlier point, if you miss a few days in the market, you're really out of money. And so these tools, just to put things in context, would've been extremely useful. And not to mention they're highly liquid, and they're very cheap. They're much cheaper than using actual bonds. As I said, bond business, bond trading is still archaic. We are still trying to use phones and price discovery, as you know, is tough to find.

Macan Nia:

Are you guys still using faxes or?

That was I think a really good session. I'm going to stop the... Well, I guess this was fun, but I was going to say boring part of the presentation because I think this is actually more fun. And typically we get very good feedback from you in terms of this session. It helps humanize the two individuals on stage. Typically, I ask rapid fire, but I thought my daughter was doing this to me the other day. It's called this or that. So I'm going to give you two options and then you pick obviously this or that. Which one would you... So I'm going to ask what it is, and then you, and you. Okay. And it's one words, no two, three minute explanations why.

Roshan Thiru:

Okay.

Macan Nia:

What's worse? Laundry or dishes?

Roshan Thiru:

This.

Macan Nia:

Dishes?

Roshan Thiru:

Dishes.

Macan Nia:

Chappie?

Chris Chapman:

Same question?

Macan Nia:

Yep.

Chris Chapman:

Yeah, dishes.

Macan Nia:

Wow. Okay. View from your home. Do you prefer a city skyline or a mountain range?

Roshan Thiru:

Oh, mountain.

Chris Chapman:

Same, mountain.

Macan Nia:

Oh, you guys are very bondish. Vacation, historical tour or a nature hike?

Roshan Thiru:

Oh, historical tour.

Chris Chapman:

I go nature hike.

Roshan Thiru:

I haven't gone hiking since 1990, but...

Macan Nia:

Okay, toga party or ugly sweater party?

Roshan Thiru:

Oh, Toga.

Macan Nia:

I'm not surprised to hear that, Roshan.

Chris Chapman:

Neither?

Macan Nia:

Neither is not an option.

Chris Chapman:

Sweater.

Macan Nia:

Okay.

Roshan Thiru:

You ready to party.

Macan Nia:

Plan ahead or live in the moment?

Roshan Thiru:

Oh, plan ahead. I'm a bond guy.

Chris Chapman:

I plan ahead.

Macan Nia:

Good answer, guys. Living in the moment was not a good answer. Leave that to the equity guys, living in the moment. Okay, last but not least, and this might get me in trouble. Frequent small arguments or rare big disagreement?

Roshan Thiru:

Both.

Macan Nia:

Chris?

Chris Chapman:

Frequent and small. Course correction as you go.

Macan Nia:

That's hilarious. Both. Your poor wife. Okay-

Roshan Thiru:

She instigates it.

Macan Nia:

Okay, now we're going down the wrong path. Okay, so in all seriousness, thank you for your time. We are all very excited at Manulife for the launch of these two new solutions because ultimately we believe whether it's the Manulife Alternative Opportunity Solution or the Manulife Strategic Income Plus solution, that they fit a need and that need is really trying to enhance returns in the bond space while reducing the risk profile of that return profile.

And I think we've said it ad nauseum, it comes to the availability of these tools that allow our portfolio managers and our larger teams to help reach those objectives. I was trying to think of what does the alternative fixed income strategy mean? How do we simplify it or humanize it? And I kind of thought of it from a music perspective. So when your traditional fixed income solutions, think about when you listen to music, it's just the volume... The bars on your, however you listen to music.

But the sound bars. The way I look at the alternative fixed income solutions in these tools, it's allowing our managers to change, whether it's the bass, whether it is to change the treble. We're not changing the underlying music, we're enhancing it, and we're trying to do this without it blowing out our eardrums. So yeah, we can maximize return, but it comes at the result of increased risk. We don't want that either. So when I look at these new solutions and I look at the tools available, it's improving the music listening experience for us.

And with that, I want to thank everyone.

Speaker 1:

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