What we're looking at
Whether exchange-traded funds offer a sensible alternative to mutual funds for getting exposure to the Canadian bond market.
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 tgam.ca/cruncher.)
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 (tgam.ca/CrP3).
TOP CANADIAN BOND FUNDS: THE 10-YEAR VIEW
|As of July 31|
|Fund name||($-mil)||MER (%)||% rtn||Quartile||% rtn||Quartile|
|Ridgewood Canadian Bond||n/a||n/a||7.03||1||6.13||1|
|Beutel Goodman Corp/Pro Active Bd-D||176.5||0.90||6.95||1||5.73||1|
|Beutel Goodman Income-D||1,745.6||0.90||6.42||1||5.08||2|
|PH&N Total Return Bond-D||795.9||0.58||6.33||1||5.87||1|
|iShares DEX Universe Bond Index||1,518.2||0.30||6.22||1||4.98||2|
|TD Canadian Bond||9,840.4||1.08||6.10||1||5.67||1|
|GBC Canadian Bond||47.8||0.95||6.01||1||6.74||1|
|McLean Budden Fixed Income D||126.0||0.65||5.74||1||5.46||2|
|RBC Advisor Canadian Bond||130.4||0.92||5.64||1||5.67||1|
|FMOQ Canadian Bond||215.0||0.95||5.60||1||5.57||1|
|Mawer Canadian Bond||67.1||0.94||5.55||1||5.97||1|
|TD Canadian Bond Index||405.8||0.81||5.47||2||5.50||2|
|Quebec Professionals Bond||538.1||1.04||5.45||2||4.62||2|
|CIBC Canadian Bond Index||420.1||1.10||5.42||2||5.39||2|
|Dynamic Canadian Bond Fund||1,424.6||1.52||5.41||2||4.96||2|
|HSBC Canadian Bond-I||348.1||1.15||5.38||2||5.71||1|
|CIBC Canadian Bond||1,675.9||1.48||5.36||2||5.82||1|
|Trimark Canadian Bond||1,052.5||1.34||5.36||2||4.65||2|
|Leith Wheeler Fixed Income||55.3||0.81||5.33||2||6.21||1|
|Scotia Canadian Bond Index||325.7||0.84||5.31||2||5.03||2|
|Scotia Canadian Income||1,499.8||1.43||5.27||2||5.68||1|
© 2007 The Globe and Mail. All rights reserved.
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