Purpose launches actively managed short-term bond ETF

Morningstar Canada 8 June, 2017 | 5:00PM

Purpose Short Duration Tactical Bond (SBND), actively managed by Toronto-based Breton Hill Capital Ltd., opened for trading today on the Toronto Stock Exchange. The exchange-traded fund will invest primarily in investment-grade fixed-income securities of Canadian and U.S. issuers. It will maintain a portfolio duration of no more than 2.5 years.

While managing within these credit and duration constraints, Breton Hill will seek to enhance returns by employing interest-rate hedging strategies and selling call options on U.S. Treasury bonds.

Though actual weightings will vary depending on the managers' decisions, the target allocations are 40% each for Canadian and U.S. investment-grade bonds, 15% for high-yield bonds and 5% cash. The maximum weight for high-yield securities is 20%. The managers will hedge at least 60% of the U.S. currency exposure, and have the flexibility to fully hedge back to the Canadian dollar.

The ETF's management fee is 0.25%, not including expenses. Purpose Investments Inc. has also created mutual-fund classes. The Class F mutual fund for fee-based advisory accounts and the Class D for discount-brokerage investors also charge 0.25%. Class A has a management fee of 0.75% and pays trailer commissions of 0.5% a year to brokers.

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