April was another silent month for activity within the CanETF Portfolio, but as always the markets kept things interesting.
|Name||Ticker||April 2018 Return||2018 YTD Return|
|Canadian Listed ETFs|
|BMO S&P/TSX Capped Composite Index ETF||ZCN||1.81%||-2.76%|
|BMO MSCI EAFE Index ETF||ZEA||1.17%||2.84%|
|BMO MSCI Emerging Markets Index ETF||ZEM||-2.13%||2.50%|
|iShares Core Canadian Universe Bond Index ETF||XBB||-0.89%||-0.82%|
|iShares Canadian Corporate Bond Index ETF||XCB||-0.62%||-0.45%|
|Vanguard Canadian Short-Term Corporate Bond Index ETF||VSC||0.03%||0.18%|
|iShares S&P/TSX Canadian Preferred Share Index ETF||CPD||-0.50%||-0.76%|
|Vanguard FTSE Canadian Capped REIT Index ETF||VRE||-0.77%||0.20%|
|U.S. Listed ETFs|
|SPDR® S&P 500 ETF||SPY||0.38%||-0.41%|
|Vanguard FTSE Developed Markets ETF||VEA||1.56%||0.41%|
|Vanguard FTSE Emerging Markets ETF||VWO||-2.07%||-0.03%|
|iShares Core U.S. Aggregate Bond ETF||AGG||-0.74%||-2.22%|
|iShares iBoxx $ Investment Grade Corporate Bond ETF||LQD||-1.23%||-4.16%|
|Vanguard Short-Term Corporate Bond ETF||VCSH||-0.11%||-0.90%|
|iShares iBoxx $ High Yield Corporate Bond ETF||HYG||0.74%||-0.39%|
|iShares U.S. Preferred Stock ETF||PFF||-0.68%||-1.32%|
|Fidelity® MSCI Real Estate ETF||FREL||0.32%||-5.75%|
Source: Morningstar.ca NAV returns for ETFs; Bank of Canada Daily Exchange Rates for currency
The most notable market event in the month occurred on the 24th, when the U.S. 10-year Treasury interest rate rose above 3% for the first time in four years.
On the same day, the U.S. 2-year Treasury note yield hit 2.5% for the first time since 2008. Thomas Franck from CNBC put together an informative write-up.
Canadian market interest rates were broadly higher as well.
Monthly Portfolio Activity
|April Balance||Beginning Value||Ending Value||Change ($)||Change (%)|
|USD RRSP Total||$5,028.46||$5,025.98||($2.48)||-0.05%|
Income was earned from PFF (pays monthly).
Current Portfolio Allocation and Balance
|Current Value (In CAD)||Current Allocation|
|USD RRSP Total||$6,451.35||56.34%|
|Grand Total (CAD at $1.2836 per USD as of 4/30/2018)||$11,451.35||100.00%|
Performance and Contribution
|Shares||Beginning Price||Ending Price||Income||Return ($)||Return (%)||Contribution|
The CAD strengthened relative to the USD, although it remains weaker year to date. The negative return from the U.S. denominated ETF holdings led to a loss in the Portfolio in base currency terms, and the negative currency translation further added to this loss in Canadian dollar terms.
No trades were placed in April.
The need to build out the Portfolio is balanced by a lack of compelling valuations across asset classes. Because the Portfolio has such a high cash balance, the idea of initiating small positions in potentially expensive assets grows in appeal with the passage of time. If the asset class was indeed overvalued and corrects to fair value, there will still be plenty of opportunity to average down. If it gets more overvalued, the Portfolio will not miss out entirely on the gain.
However, the absolute return nature of the strategy and preference for avoiding losses over participating in gains calls for more patience than appropriate in most cases. Still, the Portfolio’s 86.52% cash balance (CAD and USD combined in CAD terms) suggests there are fewer appealing ETFs than is likely the case. The Portfolio will seek to invest the cash balance in ETFs where the likelihood and magnitude of positive returns fairly outweighs the risk of loss.
The CanETF Portfolio is not meant to be taken as investment advice. Please conduct due diligence on any ETF investment you are considering, including but not limited to a review of the prospectus, underlying benchmark methodology (if applicable), portfolio characteristics, holdings, performance since inception, role in your existing portfolio, and outlook for future performance.