January 21, 2013 / 6:00 PM / in 5 years

First Asset launches Canadian provincial bond ETF

TORONTO, Jan 21 (Reuters) - Canadian money manager First Asset said on Monday it had launched the first exchange-traded fund designed to track the country’s provincial government debt market.

The ETF, which will aim to replicate the Canadian DEX Universe Provincial Bond Index less expenses, will hold investment-grade provincial debt, which offers higher yields than top AAA-rated federal government bonds.

The First Asset DEX Provincial Bond ETF started trading on the Toronto Stock Exchange on Monday and stood at C$10.00 per unit by midday.

In recent years many investors have turned away from actively managed mutual funds to lower-fee ETFs, a trend that has spurred a wave of new products.

Canada’s ETF market is dominated by BlackRock Inc, Bank of Montreal and Horizons, which is controlled by South Korea’s Mirae Asset group.

First Asset, an independent investment manager founded in 1996, has more than C$2.6 billion ($2.62 billion) in assets.

The First Asset ETF includes bonds from provinces such as Ontario, Quebec and British Columbia, with a credit rating of BBB or higher and a minimum size requirement of C$50 million per issue.

Its expense ratio is 0.25 percent.

Other ETFs, such as BlackRock iShares’ Dex Universe Bond Index, track a combination of Canadian federal, provincial, municipal and corporate bonds.

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