RBC Target 2018 Corporate Bond Index ETF - RQF

ETF Overview

Provide income, for a limited period of time ending on the RBC Target 2018 Corporate Bond Index ETF termination date, by replicating, to the extent possible, the investment results that correspond generally to the performance, before the RBC Target 2018 Corporate Bond Index ETF's fees and expenses, of the DEX 2018 Maturity Canadian Corporate Bond Index.

The ETF's target maturity date is on or about November 30, 2018.

Additional Index Information

Each DEX Maturity Canadian Corporate Bond Index is designed to represent the performance of a held-to-maturity portfolio consisting of, primarily, Canadian dollar-denominated investment grade corporate bonds with effective maturities in the applicable Maturity Year. The effective maturity of an eligible corporate bond is determined by its actual maturity or the anticipated maturity of the security as determined in accordance with a rules-based methodology developed by PC-Bond.

Qualifying securities are selected from the constituents of the DEX Universe Bond Index, with the following criteria:

are issued by corporations incorporated under Canadian federal, provincial or territorial laws
Minimum issue size / amount outstanding of $250 MM
Credit rating (index credit rating) of BBB or higher
For the initial inclusion, and additions into the respective index, have an Annual Trade Volume turnover of 20% or higher
have an effective maturity in the Maturity Year

As Index Securities mature and principal is returned, proceeds are assumed to be re-invested in Government of Canada treasury bills or cash and cash equivalents until the termination of the DEX Maturity Canadian Corporate Bond Index.

It is expected that the DEX Maturity Canadian Corporate Bond Index will consist largely, if not completely, of a portfolio of cash and cash equivalents when it terminates.

Key ETF Data

Fundamentals
Category (main)	Canadian Fixed Income - Target Maturity (2018) Corporate (investment grade) *
Underlying Index	DEX 2018 Maturity Canadian Corporate Bond Index
ETF Structure	Passive type. Endeavours to return the Index return before fees/costs
Asset Class	Fixed Income - Corporate (investment grade) *
Region	Canada
Issuer	RBC Global Asset Management
ETF Home Page	Available here

* At maturity ETF will consist largely, if not completely, of a portfolio of cash and cash equivalents

Fund Facts
Inception Date	Sept, 2011
Total Holdings	25
Distribution Frequency	Monthly
Leverage	None
Significant Currency Exposure	No
Currency Hedging	Not applicable

Fees
Management Fee	0.30%
Management Expense Ratio (MER)	0.34% *

* 2012

Trading Information
Ticker	RQF
Exchange	TSX (Toronto Stock Exchange)
Currency	CAD

Eligibility
Eligibility *	RRSP, RRIF, RESP, TFSA, DPSP, RDSP
DRIP available **	Yes
PACC Plan available **	Unknown
SWP available **	Unknown

* Always check eligibility with your plan operator as plans and accounts can differ

** Not all brokers can facilitate these plans. Check with your broker.

Current Price, Fund Performance, Yield, NAV, Charts etc

To view the TSX or Morningstar fund page for this ETF click on the Fund Data menu tab or below:

ETF Analysis

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.