Canadian ETF knowledgebase
The fund has been designed to replicate, to the extent possible, the performance of the DEX All Canada Bond Barbell Index, net of expenses.
The DEX All Canada Bond Barbell Index is comprised of Canadian federal government, provincial government and municipal government bonds (the "government bonds"), and investment grade fixed income securities issued by Canadian corporations and special purpose companies utilized and fully and unconditionally guaranteed by Canadian corporations that are federally regulated entities by the Office of the Superintendent of Financial Institutions Canada, where such company is a financing vehicle for the corporation in question (the "corporate bonds").
The Index is divided into two buckets, each representing approximately 50% of the total market value, with the short maturity bucket comprised of floating rate notes and fixed coupon bonds with at least 1 year to maturity but less than 2 years to maturity, and the long maturity bucket comprised of bonds with at least 10 years to maturity but less than 20 years to maturity.
A barbell bond investment strategy allocates the total portfolio equally between short term and long term bonds.
The barbell strategy allows the fixed-income investor to receive higher income from long term bonds while the short term bond exposure provides a counterbalance of safety and flexibility.
|Category (main)||Canadian Fixed Income - Government & Corporate (investment grade) Barbell|
|Underlying Index||DEX All Canada Bond Barbell Index|
|ETF Structure||Passive type. Endeavours to return the Index return before fees/costs|
|Asset Class||Fixed Income|
|Sub-Asset Class||Barbell - Government & Corporate (investment grade)|
|ETF Home Page||Available here|
|Inception Date||July 10, 2012|
|Significant Currency Exposure||No|
|Currency Hedging||Not applicable|
|Management Expense Ratio (MER)||Unknown *|
* Not available yet
|Exchange||TSX (Toronto Stock Exchange)|
|Eligibility *||RRSP, RRIF, RESP, TFSA, DPSP, RDSP|
|DRIP available **||Yes|
|PACC Plan available **||Yes|
|SWP available **||Yes|
* Always check eligibility with your plan operator as plans and accounts can differ
** Not all brokers can facilitate these plans. Check with your broker.
To view the TSX or Morningstar fund page for this ETF click on the Fund Data menu tab or below:
Bonds/fixed income funds should be an important component in most investment portfolios. The general rule of thumb is that you should have the percentage equivalent in bonds as per your age. So if you are 30, your portfolio should comprise 30% bonds/fixed income funds.
However the bond markets are in near unprecedented territory. Years of central bank stimulus packages and ultra-low interest rates since 2008's Financial crisis have created a massive bubble.
Many analysts including Peter Boockvar, managing director and chief market analyst at The Lindsey Group, agree. He stated in July 2016 that the bond market is in an ‘epic bubble of colossal proportions’.
Until the buddle bursts, we cannot recommend buying bonds/fixed income funds.
If you absolutely have to buy bonds/fixed income funds then ensure you always check the Yield To Maturity (YTM), also known as the Weighted Average Yield To Maturity.
The YTM is much more important than the bond's current yield (also called the current distribution yield).
The YTM (unlike current yield) considers not only the coupon income, but any capital gain or loss that an investor will realize by holding the bonds to maturity. It also considers reinvestment of the coupons.
Unfortunately the frothy bond market has meant many fixed income ETFs have had to purchase many bonds at a premium. An ultra-low rate environment and purchasing bonds at a premium makes for a particularly terrible climate for income seekers, and new fixed income investors.
Protect yourself by understanding YTM and checking the YTM of any fixed income security you are considering purchasing. Also understand quality ratings, duration and maturities.
Be particularly aware of fund fees. What is the fund's MER ()? An MER of 0.40% may not sound like much but fixed income funds are supposed to be less risky than equities (bond market bubbles such as the current one excepted) so their returns are typically considerably less. Consequently an MER of 0.40% may actually be a significant portion of any investment return from a bond/fixed income fund. Bond ETFs with sub 0.20% MERs are available.