Canadian exchange-traded fund issuer First Asset Investment Management has launched the First Asset Preferred Share ETF (FPR) and First Asset Long Duration Fixed Income ETF (FLB) on the Toronto Stock Exchange.
Preferred shares act like bonds by offering a regular pre-determined stream of income; however, as they are usually convertible to a pre-determined number of the issuer’s common stock, they afford investors the opportunity to participate in the upside potential of the firm.
The two active ETFs will be managed by sector specialists within Signature Global Asset Management, an affiliate of First Asset with over $50bn assets under management in core equity, balanced and income-oriented funds.
The First Asset Preferred Share ETF seeks to capitalize on the opportunities provided by the preferred share market as it changes and evolves. First Asset states that the active overlay of this ETF is useful in helping investors navigate the varied and complex features that are often characteristic of preferred share issues.
It will provide investors with regular distributions. The fund’s portfolio will consist primarily of preferred shares of North American issuers but may also hold investment grade corporate debt and convertible bonds. At least 75% of the preferred shares and corporate debt in the portfolio shall be rated investment grade at the end of every reporting period, which falls on 30 June and 31 December.
The fund has a total expense ratio (TER) of 0.65%.
Investing in preferred shares may be suitable for investors who wish to blend the underlying characteristics of stocks and bonds. Preferred shares act like bonds by offering a regular pre-determined stream of income Preferred rank senior to ordinary common stock but subordinate to bonds and are also usually convertible to a pre-determined number of the issuer’s common stock either after a specific time frame or on a given date. As such they afford investors the opportunity to participate in the upside potential of the firm. Preferred shares are particularly attractive to those investors who want to participate in the rise of hot growth companies but wish to maintain a degree of insulation from a drop in price should the stocks not live up to expectations.
The First Asset Long Duration Fixed Income ETF provides exposure to longer dated government bonds, taking advantage of the higher level of income and lower correlation to equity markets that they provide. A well-known hedge against equity market dislocation, longer duration government fixed income securities can represent an important component in strategic and tactical asset allocation. The ETF is to provide unitholders with regular distributions and shall form its portfolio primarily of longer dated developed markets, Canadian and US government issued fixed income securities.
A TER of 0.30% applies.