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First Asset launches three ETFs

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First Asset has launched three exchange-traded funds, which will start trading on the Toronto Stock Exchange on 10 July.



Each First Asset DEX ETF has been designed to replicate, to the extent possible, the performance of a particular PC-Bond DEX Bond Barbell Index on a low cost basis.

The First Asset DEX Government Bond Barbell Index ETF has been designed to replicate, to the extent possible, the performance of the DEX Government Bond Barbell Index, net of expenses. The DEX Government Bond Barbell Index is comprised of Canadian federal government, provincial government and municipal government bonds.

The First Asset DEX Corporate Bond Barbell Index ETF has been designed to replicate, to the extent possible, the performance of the DEX Corporate Bond Barbell Index, net of expenses. The DEX Corporate Bond Barbell Index is comprised of investment grade fixed income securities issued by Canadian corporations, as well as special purpose companies utilized and fully and unconditionally guaranteed by Canadian corporations that are federally regulated entities by the Office of the Superintendent of Financial Institutions Canada, where such company is a financing vehicle for the corporation in question.

The First Asset DEX All Canada Bond Barbell Index ETF has been designed to replicate, to the extent possible, the performance of the DEX All Canada Bond Barbell Index, net of expenses. The DEX All Canada Bond Barbell Index is comprised of Canadian federal government, provincial government and municipal government bonds, and investment grade fixed income securities issued by Canadian corporations and special purpose companies utilized and fully and unconditionally guaranteed by Canadian corporations that are federally regulated entities by the Office of the Superintendent of Financial Institutions Canada, where such company is a financing vehicle for the corporation in question.

Barry Gordon, president and chief executive of First Asset ETFs advises investment advisers and investors to consider a barbell ETF as part of a prudent, risk mitigation strategy.

"The First Asset Barbell Bond ETFs and the DEX Indexes which they replicate allocate investment grade fixed income securities in a balanced way, combining 50 per cent short term and floating rate bonds with 50 per cent in higher yielding longer term bonds – an ideal combination to maintain a strong yield while mitigating inflation and interest rate risk and protecting the value of your portfolio, on a low cost basis."

A barbell bond investment strategy is implemented, as the name implies – with 50 per cent weighting in short term bonds and floating rate notes and a 50 per cent weighting in long term bonds, with nothing in the middle.

In effect, it balances "defensive" holdings in the short bucket with "offensive" holdings in the long bucket. The 50 per cent in the short duration instruments – floaters and fixed rate bonds with near term maturities, provides minimal duration (interest rate) risk, and provides significant available capital to benefit from rising short term interest rates. That defensive positioning preserves capital and allows an investor to benefit from rising short term yields. The 50 per cent invested in the longer duration instruments provides higher current income investors need in a low rate environment, as well as exposure to longer term bonds in the event that long term rates remain unchanged or decline.
 

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