Steve Locke, Lead of the Mackenzie Fixed Income Team, outlines the strategies and opportunities that can be found in Mackenzie’s new fixed income ETFs.
Active and evolved ETFs
Mackenzie active ETFs are agile solutions designed to enhance diversification, improve risk management and seek better risk-adjusted returns. These evolved ETFs give investors expanded, cost-effective access to fixed-income securities while putting asset management decisions in the hands of experienced and innovative portfolio managers. Our active ETFs are managed by the Mackenzie Fixed Income Team.
- Core holding is made up of investment-grade Canadian fixed-income securities. The ETF may also be invested abroad, with foreign holdings hedged to protect investors against fluctuating currency values.
- Investment team has access to asset classes that are difficult for investors to purchase, such as floating rate loans and high yield bonds which can help boost income and add diversity.
- Managers monitor interest rates and adjust holdings to position the portfolio to help achieve the best return while maintaining a risk profile expected from a high-quality bond portfolio.
- Overall average credit quality of A- or higher with limited non-investment grade exposure.
- Allows investors to diversify their exposure to different economic and interest rate cycles globally.
- Actively managed ETF using quantitative and qualitative inputs to afford more comprehensive diversification.
- Unconstrained approach allows portfolio manager to select global fixed income securities/instruments across various fixed-income credit ratings, duration, structures, sectors, currencies and countries.
- Flexibility to manage portfolio volatility arising from interest rate increases or widening credit spreads.
- Holds securities with a low correlation to traditional fixed income products which helps improve the ETF’s risk/return profile
- Helps mitigate interest rate risk since floating rate loans are less sensitive to interest rate moves compared to traditional fixed-income instruments.
- Potential income enhancement from floating rate loans can offer higher yields than other conventional fixed income securities. Floating rate loans rank higher in the capital structure than other forms of debt and are generally secured by company assets.
- Floating rate loans generally have a low correlation to conventional investment-grade fixed income assets, providing diversification benefits to a portfolio.