This is a tactically managed, diversified bond portfolio that provides exposure to Canadian government, investment grade corporate, and real return bonds, as well as U.S. high yield, and emerging market debt. The portfolio management team will tactically shift the exposure to a number of underlying ETFs in an effort to best position the portfolio for the market. To be blunt, so far, they’ve failed, gaining a very modest 2.55% for the year ending October 31, while the FTSE/TMX Canadian Universe Bond Index has gained 4.43%. The big reason for this underperformance is its exposure to emerging market debt, high yield, and real return bonds. Each of these asset classes has struggled, compared with more traditional, investment grade Canadian bonds.
However, as I look ahead, with rates likely to start moving higher, I expect this well-diversified, actively managed ETF to hold up better than the more traditional bond ETFs. The team is fairly active in shifting the positioning, making several tactical moves over the quarter. That should certainly help as rate volatility moves higher. A drawback to this strategy is if the management team is not reactive enough in making these changes, any outperformance may be limited.