First Asset launches Canadian barbell bond strategy ETFs on TSX

Jul 9th, 2012 | By | Category: Fixed Income

First Asset, a Toronto Canada-based investment manager, has announced the launch of three ETFs following barbell bond investment strategies.

First Asset launches Canadian barbell bond strategy ETFs on TSX

First Asset, a Toronto Canada-based investment manager, has announced the launch of three ETFs following barbell bond investment strategies.

The three funds are the First Asset DEX Government Bond Barbell Index ETF (GXF), offering exposure to Canadian government bonds; the First Asset DEX Corporate Bond Barbell Index ETF (KXF), offering exposure to Canadian corporate bonds; and the First Asset DEX All Canada Bond Barbell Index ETF (AXF), offering exposure to both Canadian corporate and government bonds.

A barbell bond investment strategy is implemented, as the name implies, with 50% weighting in short-term bonds and a 50% weighting in long-term bonds, and nothing in the middle. In effect, it balances “defensive” holdings in the short bucket with “offensive” holdings in the long bucket.

The 50% in short duration instruments – floaters and fixed-rate bonds with near-term maturities, provides minimal duration (interest rate) risk, and provides significant available capital to benefit from rising short-term interest rates. That defensive positioning preserves capital and allows an investor to benefit from rising short term yields. The 50% invested in the longer duration instruments provides higher current income investors need in a low-rate environment, as well as exposure to longer-term bonds in the event that long-term rates remain unchanged or decline.

Barry Gordon, President and CEO of First Asset ETFs advises investment advisors and investors to consider a barbell ETF as part of a prudent, risk mitigation strategy: “The First Asset Barbell Bond ETFs and the DEX Indexes which they replicate allocate investment-grade fixed-income securities in a balanced way, combining 50% short-term and floating-rate bonds with 50% in higher-yielding longer-term bonds – an ideal combination to maintain a strong yield while mitigating inflation and interest-rate risk and protecting the value of your portfolio, on a low cost basis.”

The three ETFs will commence trading on the Toronto Stock Exchange (TSX) on Tuesday, July 10, 2012. Details are as follows:

First Asset DEX Government Bond Barbell Index ETF (GXF)

The First Asset DEX Government Bond Barbell Index ETF has been designed to replicate, to the extent possible, the performance of the DEX Government Bond Barbell Index, net of expenses. The DEX Government Bond Barbell Index is comprised of Canadian federal government, provincial government and municipal government bonds. The index is divided into two buckets, each representing approximately 50% of the total market value, with the short maturity bucket comprised of floating rate notes and fixed coupon bonds with at least 1 year to maturity but less than 2 years to maturity, and the long maturity bucket comprised of fixed coupon bonds with at least 10 years to maturity but less than 20 years to maturity. TER 0.20%.

First Asset DEX Corporate Bond Barbell Index ETF (KXF)

The First Asset DEX Corporate Bond Barbell Index ETF has been designed to replicate, to the extent possible, the performance of the DEX Corporate Bond Barbell Index, net of expenses. The DEX Corporate Bond Barbell Index is comprised of investment grade fixed income securities issued by Canadian corporations. The index is divided into two buckets, each representing approximately 50% of the total market value, with the short maturity bucket comprised of floating rate notes and fixed coupon bonds with at least 1 year to maturity but less than 2 years to maturity, and the long maturity bucket comprised of fixed rate bonds with at least 10 years to maturity but less than 20 years to maturity. TER 0.25%.

First Asset DEX All Canada Bond Barbell Index ETF (AXF)

The First Asset DEX All Canada Bond Barbell Index ETF has been designed to replicate, to the extent possible, the performance of the DEX All Canada Bond Barbell Index, net of expenses. The DEX All Canada Bond Barbell Index is comprised of Canadian federal government, provincial government and municipal government bonds, and investment grade fixed income securities issued by Canadian corporations. The index is divided into two buckets, each representing approximately 50% of the total market value, with the short maturity bucket comprised of floating rate notes and fixed coupon bonds with at least 1 year to maturity but less than 2 years to maturity, and the long maturity bucket comprised of bonds with at least 10 years to maturity but less than 20 years to maturity. TER 0.25%.

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