{"id":606,"date":"2016-06-07T08:33:51","date_gmt":"2016-06-07T15:33:51","guid":{"rendered":"https:\/\/chaltenadvisors.com\/blog\/?p=606"},"modified":"2016-06-07T08:33:51","modified_gmt":"2016-06-07T15:33:51","slug":"crossing-two-thresholds-etfs-and-negative-yielding-debt","status":"publish","type":"post","link":"https:\/\/chaltenadvisors.ca\/blog\/crossing-two-thresholds-etfs-and-negative-yielding-debt\/","title":{"rendered":"Crossing two thresholds &#8211; ETFs and negative yielding debt"},"content":{"rendered":"<p>A couple of interesting round number thresholds in the finance world were crossed recently and we thought it worth pointing out!<\/p>\n<p><strong>1) Canadian Exchange Traded Fund aggregate assets under management reach $100 billion in May:<\/strong><\/p>\n<p>ETFs in Canada continue to grow, offering investors an increasing variety of low cost and transparent investment options. \u00a0According to Atul Tiwari, head of Vanguard Canada writing for the <a href=\"http:\/\/findependencehub.com\/100-billion-beyond-etfs\/\" target=\"_blank\">Findependence Hub<\/a>, the increasing importance\u00a0of ETFs in Canada\u00a0can be attributed to 4 trends (<em>our\u00a0comments in italics<\/em>):<\/p>\n<ul>\n<li><strong>The rise of indexing<\/strong> &#8211; <em>Canada is still way behind the US in terms of adoption of low cost passive investment options but things are changing.<\/em><\/li>\n<li><strong>Increased competition<\/strong> &#8211; <em>The number of ETFs and number of ETF providers has grown significantly over the last 8 years.<\/em><\/li>\n<li><strong>Greater transparency and awareness of investment fees<\/strong> &#8211; <em>individual investors can now assemble a low-cost globally diversified portfolio for 1\/5th of one percent or lower.<\/em><\/li>\n<li><strong>Fee-based versus commission based products<\/strong> &#8211; <em>unbiased fee-based advisory services tend to favour lower cost, more transparent investment products like ETFs.<\/em><\/li>\n<\/ul>\n<p><strong>2) Global sovereign debt trading with negative yields surpasses $10 trillion globally:<\/strong><\/p>\n<p>Yes, negative yield means that if you invest in a bond and hold it to maturity you will end up with less than your initial investment\u00a0&#8211;\u00a0not a very attractive proposition for investors. \u00a0While central banks continue to try to spur risk taking, investment and economic growth by lowering rates, investors continue to thwart these efforts by demanding even more sovereign debt. Interestingly, the result is that near term returns for government bonds have been positive\u00a0as interest rates have continued to come down. \u00a0With interest rates so close to or below zero, bond prices are very sensitive to rate changes. \u00a0The resulting near term positive absolute return is offsetting the prospect for negative yield longer term. \u00a0Even some corporate bond issues are being traded at\u00a0a negative yield. \u00a0We are breaking new ground that hasn&#8217;t yet been well hypothesized\u00a0by academics or tested by industry practitioners. \u00a0While this situation is unlikely to\u00a0go on forever, it&#8217;s very difficult to try to guess what will happen next (or when rate increases may\u00a0happen)\u00a0and in\u00a0the US there is new uncertainty\u00a0over when the US Federal Reserve will resume its indicated\u00a0rate increases.<\/p>\n<p>The ETF milestone is a positive\u00a0indication that\u00a0things are getting better for Canadian investors in terms of fees and transparency. \u00a0The negative yield milestone reminds us that investors still\u00a0sometimes have to make choices in the face of extreme uncertainty. \u00a0Perhaps the best we can do is use some of those low cost ETFs to create diversified portfolios to dampen the impact of uncertainty wherever it shows up.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A couple of interesting round number thresholds in the finance world were crossed recently and we thought it worth pointing out! 1) Canadian Exchange Traded Fund aggregate assets under management reach $100 billion in May: ETFs in Canada continue to grow, offering investors an increasing variety of low cost and transparent investment options. \u00a0According to <a class=\"read-more\" href=\"https:\/\/chaltenadvisors.ca\/blog\/crossing-two-thresholds-etfs-and-negative-yielding-debt\/\">[&hellip;]<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,17,11,14,12,15],"tags":[],"class_list":["post-606","post","type-post","status-publish","format-standard","hentry","category-all-posts","category-costs","category-diversification","category-investment-industry-issues","category-passive-vs-active-investing","category-risk-and-return"],"_links":{"self":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/606","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/comments?post=606"}],"version-history":[{"count":3,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/606\/revisions"}],"predecessor-version":[{"id":609,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/606\/revisions\/609"}],"wp:attachment":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/media?parent=606"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/categories?post=606"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/tags?post=606"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}