Mackenzie Financial Corp. today announced the launch of the Mackenzie Managed Return Capital Class Fund, a bond fund substitute that offers returns with lower taxes.

The fund completes the range of asset classes available under Mackenzie’s Capital Class switch fund structure. This allows investors to shift their non-registered Mackenzie Capital Class portfolio to more conservative asset classes as their needs change — without concern of an immediate tax liability.

“A bond fund alternative has never looked better,” said Jim Fraser, senior vice president, Mackenzie Financial Services Inc. “Mackenzie Managed Return Capital Class is an attractive bond substitute — it performs like a bond fund, but is taxed like an equity fund.”

Instead of interest income, the fund generates capital gains for investors, which it distributes quarterly, providing tax relief for non-registered investors. Although 100% of bond interest income is taxable at the full marginal rate, only 50% of any capital gains are added to an investor’s taxable income.

Under the guidance of Chris Kresic, Mackenzie portfolio manager and vice president, the fund will be exposed to North American debt returns through the use of derivative and direct bond investments, with 10% of the portfolio in equities for additional capital growth. The 10% equity exposure is also expected to lower the volatility of a fund that otherwise has attributes similar to bond funds.

There are currently 37 Capital Class Funds, including the Mackenzie Managed Yield Capital Class fund, a money market-substitute that, like the new Managed Return fund, generates capital gains for investors.