CI Global Asset Management has launched an actively managed fixed income ETF in Canada providing exposure to floating rate securities issued worldwide.

The Federal Reserve is expected to hike interest rates by 0.5% at both of its next two policy meetings.

The CI Floating Rate Income Fund (CFRT CN) has been listed on Toronto Stock Exchange with a management fee of 0.35%, the lowest price tag amongst floating rate ETFs in Canada.

Floating rate securities offer coupons that adjust to reflect changes in interest rates. Compared to traditional bonds which pay fixed coupons, this feature makes floating rate securities far less susceptible to losing value when interest rates increase.

Investors are increasingly seeking to take a defensive stance on interest rates as the market expects the Federal Reserve to hike its key rate by half-point increments in both of its next two policy meetings.

Investment approach

The ETF replicates the strategy behind the CI Floating Rate Income Fund, a mutual fund launched by CI Global in June 2017. This fund has returned 3.90% per annum on average during the three years ending Q1 2022, topping its category for absolute returns over this period. The strong performance was delivered despite a challenging period for corporate credit investors due to the economic disruption of the global pandemic and the increase in interest rates over the past six months.

Day-to-day fund operations are overseen by Geof Marshall, Senior Vice-President and Senior Portfolio Manager, and Darren Arrowsmith, Vice-President and Portfolio Manager. Collectively, the pair have been working at CI Global for 26 years.

The ETF aims to provide a regular income stream by investing in higher-yielding floating rate debt securities such as bonds and loans, as well as short-term high-yield and investment-grade bonds and floating rate preferred shares.

While the fund may invest worldwide, the majority of its allocation is expected to be directed towards issuers located in the US and Canada.