Richard Schulte-Hostedde / January 18, 2016

Income Strategy Year End Review

Regular readers of Cumberland Income Fund quarterly reviews will recall that “increased volatility” is a theme we have threaded throughout our commentaries in 2015. The fourth quarter of 2015 continued on that theme in earnest. Disappointing economic data, low commodity prices, and the U.S. Federal Reserve’s first rate hike in 9.5 years caused material swings in currency, equity, and bond markets. As we exit 2015 and enter 2016 we expect the heightened levels of volatility to continue not only because of global growth uncertainty, but as a result of markets “recalibrating” to a less accommodating Fed. With the central bank of the world’s largest economy finally achieving the much anticipated “lift off” of the fed funds rate in December and hinting at further rate-hikes in 2016, investors are anticipating a headwind not felt in quite a while. Closer to home, the continuing deterioration in commodity prices is causing the Canadian dollar to depreciate and the Bank of Canada to publically discuss unconventional tools to further ease monetary policy. Managing volatility amongst these cross-currents remains the priority of the Cumberland Income Fund. The Fund continues to focus on holding investments and deploying capital with a longer-term view into securities offering stable and sustainable income generation while preserving capital. In the shorter-term, this philosophy prioritizes dampening “downside” risk over participating in “upside” bond market volatility, a strategy we expect to have greater sustainability over the long-run.