RBC has filed preliminary prospectus (available on SEDAR here) to introduce eight new ETFs. All of RBC’s ETFs will be Corporate Bond ETFs with target dates ranging from 2013 to 2020. For instance, the RBC Target 2020 Corporate Bond ETF will replicate the performance of a portfolio of Canadian dollar-denominated investment grade corporate bonds that effectively mature in 2020. The RBC ETFs will employ a sampling methodology to replicate the DEX Target Date Maturity Corporate Bond Indexes provided by PC-Bond Analytics, a provider of Canadian fixed income indices.
The DEX Target Date Corporate Bond Indices are capitalization weighted and the constituent securities are rebalanced twice annually. Since the bonds will mature at a future date, the RBC Corporate Bond ETFs have a termination date. As bonds mature during the year leading up to the termination date, the proceeds will be reinvested in cash and cash-equivalents and when the ETF terminates, it will make a cash distribution to unit holders equivalent to the ETF’s Net Asset Value.
The management fees and ticker symbols of the RBC Corporate Bond ETFs are not known at this point. Personally, I expect to remain a spectator on these new ETFs since I have no allocation to corporate bonds and don’t plan to make any in the near future. Interestingly, despite the number of new ETFs flooding the market these days, the last time I added a new ETF to our portfolios was way back in 2007 when Vanguard introduced what was then called the Europe-Pacific ETF (VEA) to replace our holdings in the iShares EAFE Index Fund (EFA). While new products and more competition are generally good for the industry, the avalanche of new ETFs hitting the market is getting to be a bit ridiculous.
