Due to the mechanics of the corporate bond market it may be difficult for investors to find a suitable corporate bond that fulfills the desired maturity profile when required.
As the RBC Target Maturity Corporate Bond ETF is traded on the exchange, investors are provided with an easily accessible product to replace an individual corporate bond.
Having a known YTM allows an investor purchasing an RBC TMCB ETF to be confident in knowing their total expected annualized return from their date of purchase through to the ETF maturity date.
While this is a feature similar to an individual bond, there are differences in the way cash flows are paid out between these two investment options.
A laddered bond portfolio is comprised of several fixed income holdings, each having a successively longer term to maturity.Much like an investment in an individual Canadian Corporate Bond, as the RBC Target Maturity Corporate Bond ETF approaches maturity, the difference between the net asset value/unit (NAV) of the fund and the par (face) value/unit will begin to narrow. Wenn ein mann sich treffen will To see how these characteristics of the fund compare to those of individual corporate bonds we have provided a quote for an individual Canadian Corporate Bond and the corresponding characteristics and likely values for the RBC Target Maturity Corporate Bond ETF.In the last year of operation, as the corporate bonds held by the fund mature, the portfolio will begin to invest the matured proceeds in cash and cash equivalents.These cash and cash equivalent investments include, but are not limited to, Government of Canada Treasury Bills and investment grade commercial paper.
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Individual bonds make regular fixed coupon payments and a fixed payment at maturity (the maturity or par value).RBC TMCB ETF payments are comprised of monthly distributions and a similar payout at maturity, but unlike with an individual bond these payments may fluctuate.While a bond laddering strategy can help mitigate interest rate risk, investors who utilize individual corporate bonds remain exposed to several other risk factors.These risks include credit risks associated with holding individual corporate issuers, price transparency in the over the counter (OTC) corporate bond market, and liquidity risks.Certain investors may believe that parts of the corporate yield curve are cheap or expensive.
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Acting upon this view can be difficult using individual corporate bonds.
Since the RBC Target Maturity Corporate Bond ETF invests in a basket of corporate issues, the diversified portfolio limits the impact of credit deterioration of a single issuer.
The structure of an RBC Target Maturity Corporate Bond ETF is designed to provide a yield to maturity comparable to what an investor could realize if they were to hold to maturity a portfolio of Canadian corporate bonds of similar credit quality and maturity as those held by the fund.
Consequently as the ETF nears maturity, and similar to a maturing bond, the fund’s yield to maturity profile will more closely reflect prevailing money market yields.
On the maturity date the fund will make a final cash distribution which will be comprised of: Even though investors receive the fund’s net asset value at maturity it is important to be aware of the fund’s par (face) value/unit.