First Asset launches actively managed IG corporate bond ETF on TSX

Aug 23rd, 2016 | By | Category: Fixed Income

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Canadian investment manager and exchange-traded fund issuer First Asset has launched the First Asset Investment Grade Bond ETF (Toronto: FIG), an actively managed ETF providing exposure to a high quality, diversified mix of investment grade corporate bonds from issuers in Canada, the US and Europe.

First Asset introduces actively managed investment grade bond ETF

The First Asset Investment Grade Bond ETF (FIG) has begun trading on the Toronto Stock Exchange.

The ETF, which has been listed on the Toronto Stock Exchange (TSX), has come about via the conversion of the Marret Investment Grade Bond Fund.

Toronto-based Marret Asset Management, which specialises in credit fixed income portfolios, will continue to act as manager to the fund.

Paul Sandhu, Vice-President of Marret Asset Management and Lead Portfolio Manager for FIG, commented: “The conversion of this fund into an ETF is exciting for us and our investors. It combines the benefits of active management provided by our credit research team, including access and execution, with the benefits of the ETF structure, including transparency, tax efficiency, liquidity and low cost.”

The objective of the fund is to provide attractive monthly distributions, low volatility and negative correlation to other asset classes.

According to First Asset, a key benefit of the fund is its ability to adapt to changing market conditions, compared to passive fixed income ETF exposures, through its mandate to hedge interest rate risk, credit risk and broader systemic market risks. Foreign currency exposure will also be hedged back to Canadian dollars in all but exceptional market circumstances, whereby a maximum 20% of foreign currency exposure may remain unhedged.

The fund’s current holdings suggest it is seeking to increase yield by holding a larger proportion of bonds at the lower-rated end of the investment grade scale. As of 22 August 2016 the largest holdings of bonds came from the BBB-rated bracket (86.1%), followed by A-rated bonds (13.7%). Securities from Canadian issuers were also highly favoured at 74.7% of the portfolio’s allocation, followed by US issuers (17.0%) and lastly European issuers (8.2%).

The largest sector allocations within the fund are to financial services (13.8%), transportation (12.9%), real estate (12.7%), energy (10.5%) and banking (8.5%). There are 42 holdings in the fund, the largest of which are First National (5.3%), Viterra (4.8%), Rogers Communications (4.7%), Canadian Pacific Railway (4.6%) and IGM Financial (4.5%).

The current yield of the fund is 4.81%, the average coupon is 5.28% and the average duration is 5.37 years.

It has a total expense ratio of 0.65%.

As of 31 July 2016 the fund is up 4.75% year-to-date.

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