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`Cream Puffs' Offer Tasty Yield for This Top Canada Bond Fund

  • Penderfund’s Castle looks for high-yielders with cash, assets
  • His fund returned 23% in 2016 and beats 75% of peers this year
The CN Tower, center, stands near residential and commercial buildings in the financial district of Toronto, Ontario.

The CN Tower, center, stands near residential and commercial buildings in the financial district of Toronto, Ontario.

Photographer: Brent Lewin/Bloomberg

Geoff Castle’s formula for beating his peers in the bond market starts with “cream puffs”: his term for unrated corporate bonds whose yields are often too sweet for other investors.

Bets on companies like Just Energy Group Inc. and W&T Offshore Inc. led to a return of 23 percent last year for the corporate bond fund Castle manages at Vancouver-based Penderfund Capital Management Ltd. That beat 98 percent of its peers, according to data compiled by Bloomberg. This year, the fund has gained 5.4 percent, outperforming three-quarters of its peers. Penderfund manages about C$645 million ($530 million) in total, with about C$160 million in credit.