Fixed Income ETFs Suddenly in the Spotlight
TD Asset Management Inc. (TDAM) has a long history of delivering solutions that can help investors meet their investment objectives. Since 2016 they have brought that expertise to the Exchange-Traded Fund (ETF) space to provide a variety of cost-effective solutions, including fixed income ETFs.
Fixed income ETFs can play an important role in any portfolio by helping to enhance diversification and lower fees. In simple terms, fixed income ETFs enable investors to buy a basket of bonds, that are representative of a particular bond index or sector. And like equities, they can be bought and sold on a stock exchange through a financial advisor or an online brokerage. Since bonds do not trade on an exchange, using an ETF to gain exposure is easier and more cost effective than trying to build a portfolio using individual bonds.
Fixed income ETFs represent about 30% of the more than $300 billion invested in Canadian ETFs and make up about 325 of the over 1,300 Canadian listed ETFs. Fixed income is making a dramatic comeback after close to a decade and a half in the doldrums due to ultra low interest rates. As many central banks increase interest rates to attack sky high inflation, fixed income ETFs are gaining in popularity, especially for investors who want to pay lower fees, generate cash flow, maintain liquidity, reduce volatility, and preserve capital. Year-to-date, as of the end of February, fixed income ETFs have seen approximately $1.53 billion in fund inflows, the highest amount of any asset class so far this year. Looking at the details, about half of that ($0.76 billion) went into aggregate fixed income ETFs. These ETFs tend to have broad exposure to the Canadian bond market and will typically hold a mix of government and corporate bonds. A little less than half ($0.63 billion) went into corporate bond ETFs. Corporate bonds on average will have higher yields, to compensate for the additional risk over government bonds.
With a myriad of investment choices available to investors, getting the right product for a particular investment need is key to long term success. TDAM is one of the largest fund manufacturers in Canada, managing over $400B in assets for institutional and retail investors and offering over 40 ETFs, including 12 fixed income ETFs. While the company has consistently been known for its deep fixed income expertise in the mutual fund space, that ability has carried over into ETFs as TDAM leverages its strong capabilities in index and active fundamental fixed income investing.
Fixed income ETFs can be a steady source of income, provide diversification benefits, and the potential for protection against unwanted risk during periods of market uncertainty.
Fixed income investing at TDAM is a true team effort. All research in support of actively managed fixed income TD ETFs is done in-house, so they are never dependant on third party analysis or bond rating agencies. That’s the advantage of working with one of Canada's largest fixed income managers.
TDAM offers a comprehensive suite of fixed income ETFs, ranging from high yield to more conservative government bond exposure, to help investors stay invested in all market conditions. For an overview of all fixed income TD ETFs, download The TDAM Fixed Income Advantage.
To learn more about the different types of ETFs available from TDAM, visit td.com/etfs.
 Assets under management (AUM) for TD Asset Management Inc. and Epoch Investment Partners, Inc. As of December 31, 2022.