Easy access to a managed bond ladder
RBC 1-5 Year Laddered Bond ETFs offer attractive monthly income from a single, high-quality portfolio of bonds with staggered maturities to reduce interest rate risk.
Overview
Build and manage a 1–5 year bond ladder, with diversified exposure to shorter-term, investment grade Canadian corporate bonds.
Why RLB?
- One-ticket access to a buy-and-hold bond ladder with a transparent, consistent maturity profile
- Staggered maturities reduce interest rate risk
- Attractive monthly income
How does RLB work? >
Why RBO?
- Exposure to high-quality investment grade corporate bonds
- Attractive regular monthly income
- Broad diversification and a transparent, consistent maturity profile
- Easy access to a buy-and-hold bond ladder
How does RBO work? >
Additional Information
Mix of high-quality bonds
To enhance yield-to-maturity, RLB holds 70% of its portfolio in Canadian investment-grade corporate bonds through RBC Target Maturity Bond ETFs, and 30% directly in Canadian government bonds. Corporate bond exposure is well diversified, with no more than 10% allocated to a single issuer. The overall weighted-average credit rating of the portfolio's corporate debt is 'A'.
Equally weighted by maturity year
The portfolio is divided into five equally weighted (20%) segments, one for each of the five maturity years. This provides consistent liquidity and reduces the risk of rising interest rates.
Monthly income distributions
RLB pays out all its net income on a monthly basis. The amount of the payout depends on the income stream received from the underlying bonds, and may vary from month to month. Distributions are expected to be mostly interest income.
Rolling maturity dates and rebalancing
RLB is designed to maintain a laddered 1-5 year maturity profile. At the end of each year, the portfolio managers sell those bonds that mature within one year and replace them with new bonds that mature in five years. For example, in December 2016, they will sell RQE and the government bonds maturing in 2017. They will then purchase new bonds with a targeted maturity date of 2022. Each quarter, the portfolio managers rebalance the portfolio to ensure a 20% allocation to each maturity year.
RLB holdings: Five segments equally weighted by maturity year
Maturity
1 Year
2 Years
3 Years
4 Years
5 Years
Maturity
1 Year
2 Years
3 Years
4 Years
5 Years
An ETF-of-ETFs
RBO invests equally in five RBC Target Maturity Corporate Bond ETFs with maturities ranging from one to five years. By combining these five ETFs, RBO offers a broadly diversified one-stop short-term investment grade corporate bond solution.
Monthly distributions
RBO will pay out all net income on a monthly basis. The payout depends on the income stream from the underlying bonds held, and it may vary from month to month. The distributions are expected to be mostly interest income.
Equal weighted by maturity year
By investing equally (20%) in each of the five underlying ETFS, RBO offers investors a trasparent and relatively consistent maturity profile.
Rolling over and rebalancing
RBO is designed to maintain its one to five year maturity profile, which allows investors to buy and hold for as long as the solution suits their needs. To achieve this, each year in January, RBO will sell its holdings in the ETF maturing that same year and buy the ETF maturing in five years. For example, in January 2015, RBO will sell the ETF maturing in 2015 (RQC) and will purchase the ETF maturing in 2020 (RQH). Rebalancing to a 20% allocation to each maturity year will occur quarterly.
RBO holdings: Five segments equally weighted by maturity year
Maturity
1 Year
2 Years
3 Years
4 Years
5 Years
Maturity
1 Year
2 Years
3 Years
4 Years
5 Years
*Source: RBC GAM, IFIC. Based on AUM including IFIC money market, fixed income, income oriented balanced and income oriented equity mutual fund solutions plus income oriented ETF solutions as of December 31, 2015.
Commissions, management fees and expenses may be associated with investments in exchange-traded funds (ETFs). Please read the prospectus before investing. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. RBC ETFs do not seek to return any predetermined amount at maturity. RBC ETFs are managed by RBC Global Asset Management Inc., an indirect wholly-owned subsidiary of Royal Bank of Canada.