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Index IDEA: Canada advisors seek smart beta for diversification and yield

A recent FTSE Russell survey of Canadian financial advisors found improving diversification and increasing yield as their top two reasons for using investment products and strategies based on smart beta indexes.

Among 81 Canadian financial advisors surveyed on how they use smart beta index-based products, 31% cited improving diversification while 30% cited increasing yield. These uses ranked ahead of transparency (24%), cost (21%) and tax efficiency (18%)—terms typically associated with use of index-based investment approaches.

Source: FTSE Russell - Smart beta: 2018 survey findings from US, Canadian and UK financial advisors.

Marina Mets – managing director, fixed income, FTSE Russell:

“We are seeing smart beta gain more widespread acceptance among financial advisors in Canada. And, as shown in our latest research, these advisors are using a variety of innovative new index-based investment products to pursue a broad range of investment objectives. Yield enhanced fixed income smart beta indexes are just one of the many new and exciting index solutions that are helping Canada-based financial advisors and their clients.”

A recent yield comparison for the FTSE TMX 1-5 Year All Government Laddered Bond Index, comprised of 52% federal, 40% provincial and 8% municipal bonds, to the FTSE TMX Canada Short Government Bond Index which is relatively shorter in duration and less diversified across securities, (72% federal, 26% provincial, 2% municipal) helps illustrate the possibility of enhancing yield while diversifying fixed income constituents:

PowerShares Canada recently chose the FTSE TMX 1-5 Year All Government Laddered Bond Index to serve as the basis for its new ETF.

Jasmit Bhandal – VP, head of product strategy & development, PowerShares Canada:

“In the current environment, our financial advisor clients are looking for ways to achieve enhanced yield along with increased diversification among their fixed income holdings. As FTSE Russell’s research and statistics bear out, this is desirable as well as possible through a fixed income index-based approach."

Get more information on ETFs based on indexes from FTSE Russell.

About FTSE Russell:

FTSE Russell is a leading global index provider creating and managing a wide range of indexes, data and analytic solutions to meet client needs across asset classes, style and strategies. Covering 98% of the investable market, FTSE Russell indexes offer a true picture of global markets, combined with the specialist knowledge gained from developing local benchmarks around the world.

FTSE Russell index expertise and products are used extensively by institutional and retail investors globally. Approximately $15 trillion is currently benchmarked to FTSE Russell indexes. For over 30 years, leading asset owners, asset managers, ETF providers and investment banks have chosen FTSE Russell indexes to benchmark their investment performance and create investment funds, ETFs, structured products and index-based derivatives. FTSE Russell indexes also provide clients with tools for asset allocation, investment strategy analysis and risk management.

A core set of universal principles guides FTSE Russell index design and management: a transparent rules-based methodology is informed by independent committees of leading market participants. FTSE Russell is focused on index innovation and customer partnership applying the highest industry standards and embracing the IOSCO Principles. FTSE Russell is wholly owned by London Stock Exchange Group.

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Views expressed by Marina Mets of FTSE Russell and Jasmit Bhandal of PowerShares Canada are as of March 6, 2018 and are subject to change. They also do no not necessarily reflect the views of LSEG or FTSE Russell.

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