Toronto-based BlackRock Asset Management Canada Ltd. on Thursday announced the launch of two new iShares strategic fixed income exchange-traded funds (ETFs) to help generate income for investors while addressing sensitivity to interest rate volatility.
iShares Conservative Short Term Strategic Fixed Income ETF (TSX:XSC) and iShares Conservative Strategic Fixed Income ETF (TSX:XSE) follow the launch earlier this year of iShares Short Term Strategic Fixed Income ETF (TSX:XSI).
“We listened to our clients and are moving to meet their needs. The success of XSI demonstrates that investors are eager for fixed income solutions to help generate income, mitigate duration risk and navigate an uncertain interest rate environment,” said Pat Chiefalo, managing director, head of Canadian product for BlackRock’s iShares business, in a statement.
The two new ETFs are expected to appeal to an investor with a relatively ‘conservative’ risk profile through limiting their total exposure to high yield securities to 25% of each fund’s respective portfolio upon rebalancing.
The two funds will invest primarily in securities or ETFs that provide exposure to Canadian and international fixed income securities. Both funds will seek to hedge any resulting U.S. dollar or other foreign currency exposure, as applicable, back to Canadian dollars. XSC will also upon rebalancing, generally limit its exposure to interest rate risk by maintaining a portfolio duration of less than five years.
The management fees will be 0.40% for XSC and 0.50% for XSE.
Structured as a “fund of funds”, XSC and XSE draw upon BlackRock’s global iShares platform. They will directly hold funds that provide exposure to both domestic and international fixed income securities that Canadian investors might otherwise have difficulty accessing, such as emerging markets corporate bonds.