BlackRock Asset Management Canada has made changes to the investment strategy of three of its iShares exchanged-traded funds (ETFs).
The changes are aimed at clarifying and enhancing the manner in which a proprietary portfolio optimisation process is used in the construction of the funds' portfolios.
The funds are the iShares Conservative Short Term Strategic Fixed Income ETF (XSC); the iShares Conservative Strategic Fixed Income ETF (XSE); and the iShares Short Term Strategic Fixed Income ETF (XSI).
In constructing the portfolio of each iShares fund, BlackRock Canada currently uses a proprietary portfolio optimisation process to estimate efficient portfolios with total volatility levels that are consistent with a broadly diversified portfolio of Canadian fixed income securities.
As an additional risk management technique, on a going forward basis, the process will also be configured to estimate efficient portfolios with expected yield or long-term expected returns that fall within a specified range relative to the broader Canadian bond market.
Prior to implementing any such portfolio, BlackRock Canada (or its affiliated sub-adviser) reviews the output of the portfolio optimisation process and may make adjustments based on market outlook and other factors, such as trading costs.
Upon implementing the enhancements, the additional optimisation process will initially be configured to: (a) in the case of XSC, estimate an efficient portfolio with a targeted average yield to maturity ranging between +50 and +100 bps above the FTSE TMX Canada Universe Bond Index; (b) in the case of XSI, estimate an efficient portfolio with a targeted average yield to maturity ranging between +100 and +150 bps above the FTSE TMX Canada Universe Bond Index; and (c) in the case of XSE, estimate an efficient portfolio with a targeted expected return ranging between +75 and +125 bps above the FTSE TMX Canada Universe Bond Index.
In each case, the configuration of the optimisation process may change from time to time in BlackRock Canada's discretion, subject to each funds’ investment objective.
The enhancements to the optimisation process do not impact the risk rating currently assigned to each iShares fund, as disclosed in the funds' prospectus.