Three new fixed-income categories created

Morningstar Canada 2 May, 2018 | 5:00PM

Investors who use Morningstar.ca or Morningstar data products to research fixed-income investment funds will be able to further fine-tune their screening process, thanks to three new categories.

They are Canadian Corporate Fixed Income, Global Corporate Fixed Income and Emerging Markets Fixed Income. On Morningstar.ca, these categories can now be selected using our Fund Finder and ETF Finder tools that are found on the home page. The categories were developed by the Canadian Investment Funds Standards Committee (CIFSC), of which Morningstar is a member.

Spun off from four continuing but now more strictly defined categories, the three new categories took effect as of the release of March month-end data and have been fully implemented by Morningstar.

Here are details of the new categories:

Canadian Corporate Fixed Income funds have a stated mandate to invest primarily in investment-grade corporate bonds. At least 90% of their fixed-income holdings are in Canadian dollars with an average duration greater than 3.5 years and less than 9.0 years. The average credit quality of the portfolio as a whole is investment grade (BBB or equivalent rating or higher), and not more than 40% of the portfolio's holdings may be invested in high-yield fixed-income securities. At least 60% of the portfolio's fixed-income holdings are in corporate fixed income. Up to 30% of the fund's assets may be held in foreign fixed-income products that will be treated as Canadian content, provided that the currency exposure of those holdings is hedged into Canadian dollars.

Global Corporate Fixed Income funds have a stated mandate to invest primarily in corporate bonds and invest less than 90% of their fixed-income holdings in Canadian-dollar issues. In addition, they invest primarily in investment-grade fixed-income securities (BBB or equivalent rating or higher) and not more than 40% of the portfolio's holdings are invested in non-investment-grade securities. At least 60% of the portfolio's fixed-income holdings are in corporate issues.

Emerging Markets Fixed Income funds invest at least 90% of their fixed-income holdings in countries from emerging markets or currencies from countries in emerging markets. Funds with a consistently narrow focus on a single country, group of countries or single region within emerging markets will be excluded from this category.

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