CIBC launches diversified yield fixed income ETF in Canada

Jan 27th, 2020 | By | Category: Fixed Income

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CIBC Asset Management has launched a new fixed income ETF in Canada, providing actively managed exposure to a globally diversified portfolio of bonds.

David Scandiffio, President and CEO, CIBC Asset Management

David Scandiffio, President and CEO, CIBC Asset Management.

The CIBC Flexible Yield (CAD-Hedged) ETF (CFLX CN) has listed on the Toronto Stock Exchange and comes with a management fee of 0.75%.

The ETF seeks a combination of high current income with the potential for long-term total return and aims to diversify its sources of yield by investing across multiple income-producing sectors. Distributions will be sent to investors on a monthly basis.

David Scandiffio, President and CEO, CIBC Asset Management, commented, “Investors are increasingly looking for active fixed income solutions to help them diversify their portfolios, and we are pleased to deliver an ETF solution to meet these needs.”

The ETF gains its target exposure by investing directly in the Renaissance Flexible Yield Fund, which is sub-advised by Jeffrey Gundlach’s Doubleline Capital.

The Renaissance fund aims for suitable diversification while maintaining the flexibility to take advantage of opportunistic gains throughout the market cycle.

It may invest unrestricted in developed market government bonds and mortgage-backed securities, as well as have limited exposure to the following sectors: investment-grade credit (limited to 50% of the total portfolio), asset-backed securities and commercial MBS (40%), high-yield debt (50%), collateralized loan obligations (30%), floating-rate bank loans (50%), foreign exchange (50%), and emerging market debt (50%).

The fund uses active duration management in a bid to contain risk in all interest rate environments and attempts to offset the effect of fluctuating exchange rates by hedging foreign currency exposure back to the Canadian dollar.

According to Gundlach, CEO and CIO of Doubleline, the fund is structured with a long-term market outlook, as opposed to the short-term trading tactics of many rival firms.

“I think that the lack of short-term trading is somewhat unique to DoubleLine,” said Gundlach. “We run relatively low turnover types of portfolios. Our goal is to buy low, structure the portfolio right and earn out the cash flows, hopefully to premium to the market under an overall risk umbrella that is probably below average. I think we’ve grown a lot and our investors have been satisfied with the results because they know that we’re extremely focused on risk management.”

CIBC debuted its first ETFs in January 2019 with the launch of four ETFs including two actively managed fixed income funds. The CIBC Active Investment Grade Floating Rate Bond ETF (CAFR CN) invests primarily in Canadian investment grade floating rate debt, while the CIBC Active Investment Grade Corporate Bond ETF (CACB CN) invests primarily in Canadian investment-grade corporate bonds.

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