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iShares International Fundamental Index ETF (TSX: CIE)
I have to admit I really like the theory behind fundamental ETFs. The goal of a fundamental approach is to weight companies in the index based on their financial health, rather than by their size. Ideally, because of this focus on quality, it should provide a return that is comparable to a market cap weighted index, with less volatility. In this case, the top 1000 listed companies that trade outside the U.S. are ranked by four fundamental criteria; sales, cash flows, book value, and dividends. Unfortunately, the reality hasn’t quite lived up...
read moreVanguard U.S. Total Market Index ETF (CAD-hedged) (TSX: VUS)
Of the U.S. equity ETFs on the Focus List, this was the worst performer for the three months ending January 31, falling by 7.8%, compared with a drop of 6.6% for the iShares Core S&P 500 Index ETF (TSX: XSP). The main reason for this performance differential is VUS provides exposure to the entire U.S. equity market. Holding approximately 3,700 individual securities, about one third of the portfolio is invested in small and mid-sized companies. In comparison, XSP holds around 500 names, with virtually no exposure to small caps, and less...
read moreiShares S&P/TSX Completion Index ETF (TSX: XMD)
It is rather tough to find a good small / mid-cap ETF with a focus on Canadian equities. There are really only about four that are considered to be Canadian Small / Mid Cap Equity ETFs. Sadly, this is the best option. Essentially, it provides exposure to the Canadian traded companies that are part of the S&P/TSX Composite Index, but are not part of the S&P/TSX 60 Index. Because of this, it tends to skew somewhat mid-cap, with an average that is about five times that of the S&P/TSX Small Cap Index. If you absolutely require an ETF...
read moreBMO Low Volatility Canadian Equity ETF (TSX: ZLB)
Low volatility funds and ETFs have become rather popular with investors lately, and it’s not hard to see why. Who doesn’t love the idea of getting returns that will come pretty close to the broader market, but with a lot less downside? It sounds too good to be true, and while the track records are still relatively short, the early results are very encouraging. This was the best performing Canadian ETF on the Focus List over the period, falling 1.3%, compared with a drop of 4.8% for the S&P/TSX Composite Index. The longer term numbers are...
read moreiShares Canadian Universe Bond Index ETF (TSX: XBB)
With the Bank of Canada expected to keep interest rates on hold for the next little while, bonds are likely to remain a positive contributor to portfolio performance. This ETF is my top pick at the moment. It provides exposure to a diversified portfolio of Canadian government and investment grade corporate bonds. It is a high quality portfolio, with about 70% invested in government issues, and the balance in corporates. Its duration is fairly long, coming in at 7.42 years at the end of February. The higher the duration, the more sensitive it...
read morePowerShares Senior Loan CAD Hedged ETF (TSX: BKL)
With worries a slowing economy could result in higher default rates, high yield bonds and leveraged loans were sold off, pushing yields and credit spreads higher. For the three months ending January 31, BKL lost nearly 2%, but managed to finish in the upper half of its peer group. This loss was even with the U.S. Federal Reserve finally moving rates higher in December. This was the worst performing fixed income ETF on the Focus List, and was the only one to finish in negative territory. Again, I reiterate that this recent selloff highlights...
read moreBrandes Global Small Cap Fund
Fund Card This deep value offering from Brandes had a very strong quarter, gaining 5.5%, matching the peer group, but lagging the index. It ended the year with a gain of more than 22%, putting it firmly in the upper quartile of all global small and mid-cap funds. It is managed using a value focused process that looks to buy companies that are trading a significant discounts to their true value. On the surface it appears to be more volatile than its peers, with a standard deviation that is considerably higher than both the index and its...
read moreTrimark Fund
Fund Card This bottom up managed global equity fund has been one of my favourites for a long time now. The managers look for companies that are industry leaders, have strong barriers to entry, high levels of free cash flow, and excellent management teams that have a history of generating high returns on invested capital. The companies trade at a discount to what they believe the stock is worth. The result is a concentrated portfolio that holds between 30 and 50 names. Performance has been excellent with a five year annualized gain of 14.6%,...
read moreRBC Global Corporate Bond Fund
Fund Card This actively managed global bond fund invests mainly in investment grade corporate bonds from issues anywhere in the world, as well as high yield and emerging market bonds. At the end of December, it held about 15% in high yield issues, and about 10% in emerging market bonds. The fund was down 0.1% while its index was up by 0.1%. It was a tough quarter for global bonds with the U.S. Federal Reserve looking to boost rates, while most other central banks looking to do the opposite. Adding to the uncertainty was the continuing selloff...
read morePH&N Total Return Bond Fund
Fund Card This remains my top Canadian bond fund pick for a couple of reasons. The first is the excellent management team and investment process used by PH&N. Second, with interest rates in Canada more likely to stay flat or move lower, this fund, with its duration of 7.3 years and yield to maturity of 2.4% is more likely to generate stronger returns than either the TD Canadian Core Plus Bond Fund, or the ultra-conservatively positioned Dynamic Advantage Bond Fund in the near term. The management team are quite active in the fund, and...
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