Toronto-based Sentry Investments Inc. said Monday that the federal government’s crackdown on character conversion transactins will impact two of the firm’s corporate class mutual funds.
In the 2013 federal budget, the government proposed to eliminate of the tax benefits traditionally associated with character conversion transactions.
As a result of this announcement, any capital gains realized in relation to forward contracts must be treated as ordinary income.
Budget 2013: Funds, ETFs take a hit
Two Sentry funds — Sentry Enhanced Corporate Bond Capital Yield Class and Sentry Tactical Bond Capital Yield Class — currently employ forward contracts.
Sentry has decided to temporarily close both funds to new and additional purchases, effective at the close of business on Friday, April 5, in order to protect the interests of current investors.
The funds will, however, continue to utilize their forward contracts in respect of existing assets for a period of approximately 180 days, as is currently permitted under the budget proposal, Sentry says.