First Asset short-duration ETF is actively managed

Morningstar Canada 14 September, 2017 | 5:00PM

The newly launched First Asset Enhanced Short Duration Bond (FSB/TSX), actively managed by fixed-income specialist Marret Asset Management Inc., aims to provide positive absolute returns over any 12-month period with low volatility and regular monthly distributions. Sponsored by First Asset Investment Management Inc., the exchange-traded fund opened for trading on Sept. 12. The management fee, not including expenses that will be charged to the ETF, is 0.6%.

The portfolio-management team headed by Marret founder Barry Allan will invest primarily in U.S. and Canadian corporate bonds, while employing government bond futures to target an overall portfolio duration of less than two years. The managers will use government debt or futures to hedge the interest-rate risk of the corporate debt.

Management can invest across the credit spectrum, including high-yield and unrated issues. Holdings may also include debt futures, convertible debentures and credit derivatives.

During adverse market conditions, the ETF may have significant holdings of government debt and cash instruments. Government debt issued by other developed countries may also be added tactically on a currency-hedged basis.

Marret intends at all times to hedge at least 90% of the non-Canadian currency exposure attributable to the common units back to the Canadian dollar.

First Asset has received regulatory approval for a U.S.-dollar version of the ETF. Scheduled to be launched next month, these units will also employ currency hedging, with at least 90% of the non-U.S. currency exposure attributable to the U.S.-dollar units being be hedged back to the U.S. dollar.

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