By mixing capital gains and interest income, ETFs seek to provide enticing after-tax return till maturity
RBC iShares has announced the launch of new ETFs – the RBC U.S. Discount Bond ETF and USD units of the RBC U.S. Dividend Covered Call ETF, both of which are now trading on the Toronto Stock Exchange.
"Since its launch in 2019, RBC Canadian Discount Bond ETF has been one of our more popular ETF solutions, attracting significant attention from Canadian advisors and investors due to its unique investment objective and goal of providing attractive after-tax yield to maturity," said Mark Neill, head of RBC ETFs at RBC Global Asset Management Inc.
Each of the RBC U.S. Discount Bond ETFs and RBC U.S. Discount Bond (CAD Hedged) ETFs aim to give investors exposure to a diverse portfolio of primarily short-term bonds issued in the U.S. market by U.S. governments and U.S., and foreign corporations, and which are trading at a discount to the average price of the U.S. short-term bond universe. Currency fluctuations between the U.S. and Canadian dollars are also hedged by the RBC U.S. Discount Bond (CAD Hedged) ETF.
By providing a return that includes both capital gains and interest income, each ETF seeks to provide an appealing after-tax yield to maturity in comparison to other U.S. high quality fixed income alternatives. The ETFs are actively managed and make use of RBC GAM Inc.'s extensive knowledge of actively managing fixed income portfolios.
"By leveraging the expertise of the U.S. fixed income team at RBC Global Asset Management, we are pleased to expand our discount bond offering to cover the U.S. market, allowing our clients to achieve greater geographic diversification within their fixed-income portfolios," Neill said.
The RBC U.S. Dividend Covered Call ETF, which was recently introduced, is now also available in USD units through RBC iShares, enabling Canadian advisors and investors to purchase it and receive payments in U.S. dollars.