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Canadian bond market: Mutual fund or ETF?

What we're looking at

Whether exchange-traded funds offer a sensible alternative to mutual funds for getting exposure to the Canadian bond market.

Our screen

Let's look at the top-performing funds in the Canadian fixed-income category over the past 10 years and see if any ETFs make the list.

One-year returns are less important, but we've thrown them in here just to give you an idea of how these funds have performed during the recent financial market volatility. You'll also find quartile rankings, which divide funds in a category into four groups according to their returns. First quartile is best, fourth is worst. (Only the top 25 funds are shown here; read the full list online at

What we found

Only one bond ETF makes our list, the iShares DEX Universe Bond Index Fund (XBB), and it ranks seventh out of a total 53 funds. It didn't make the most money on average over the past 10 years, but it was good enough to comfortably ease into the first quartile of bond funds over that same period.

Without a doubt, there are some very good bond mutual funds on this list. The Beutel Goodman and Phillips, Hager & North funds have low fees and can almost always be found among the bond fund leaders. TD Canadian Bond is another consistently good top name. Why pick an ETF? In addition to cheap fees, ETFs are easy to use and understand.

XBB tracks the DEX Universe Bond Index, which includes both government and corporate bonds. It's the Canadian bond market wrapped up in a single package that, as our chart shows, few other managers could surpass over the past 10 years. Worried the manager who made those good returns will leave? Forget it - this is an index fund. Nervous about what the fund holds? Just check the portfolio holdings on the iShares website, which are updated daily.

XBB's direct bond ETF competitors have all been around for less than 10 years. They are: BMO Aggregate Bond Index ETF (ZAG), Claymore Advantaged Canadian Bond ETF (CAB) and Horizons AlphaPro Tactical Bond ETF (HAF).

For details on how ETF returns stack up when you factor in fees paid to investment advisers, see Thursday's Number Cruncher (



As of July 31
Assets Latest10-yr avg10-yr1-yr1-yr
Fund name($-mil)MER (%)% rtnQuartile% rtnQuartile
Ridgewood Canadian Bondn/an/a7.0316.131
Beutel Goodman Corp/Pro Active Bd-D176.50.906.9515.731
Beutel Goodman Income-D1,745.60.906.4215.082
PH&N Bond-D819.50.596.3515.951
PH&N Total Return Bond-D795.90.586.3315.871
Integra Bond185.01.126.3016.151
iShares DEX Universe Bond Index1,518.20.306.2214.982
TD Canadian Bond9,840.41.086.1015.671
GBC Canadian Bond47.80.956.0116.741
McLean Budden Fixed Income D126.00.655.7415.462
FÉRIQUE Bond289.10.535.7015.691
RBC Advisor Canadian Bond130.40.925.6415.671
FMOQ Canadian Bond215.00.955.6015.571
Mawer Canadian Bond67.10.945.5515.971
TD Canadian Bond Index405.80.815.4725.502
Quebec Professionals Bond538.11.045.4524.622
MD Bond1,534.10.975.4225.432
CIBC Canadian Bond Index420.11.105.4225.392
Dynamic Canadian Bond Fund1,424.61.525.4124.962
HSBC Canadian Bond-I348.11.155.3825.711
CIBC Canadian Bond1,675.91.485.3625.821
Trimark Canadian Bond1,052.51.345.3624.652
Leith Wheeler Fixed Income55.30.815.3326.211
Scotia Canadian Bond Index325.70.845.3125.032
Scotia Canadian Income1,499.81.435.2725.681
Source: Globeinvestor

© 2007 The Globe and Mail. All rights reserved.

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