Tuesday, 30 November 2010

New iShares Preferred Share ETF - How Does It Compare?

The November 16th launch of trading in the brand new iShares S&P/TSX North American Preferred Stock Index Fund (CAD-Hedged) ETF (symbol XPF) brings competition to the income-oriented preferred share space. Up to now, Claymore's S&P/TSX CDN Preferred Share ETF (CPD) has been the sole such ETF traded in Canada, though various other ways exist to acquire preferred shares for a portfolio, as we described in a previous post Preferred Shares: an Opportunity for Taxable Accounts. Let's see how the new XPF compares to CPD and to a major closed-end fund for preferred shares, the Diversified Preferred Share Trust (DPS.UN) managed by Sentry Select Capital Inc. We note in passing that Horizons AlphaPro has also just launched a preferred share ETF (symbol: HPR) but the skimpiness of information on the ETF's webpage prevents us from assessing it here.

Key Comparison Factors:
(for details click on the table image below)

Costs: Management Expense Ratio, Trading Costs, Hedging - CPD has the edge due to: a) its low MER; b) its higher trading volume, which keeps bid-ask spreads low and; c) the absence of hedging cost. The decision of iShares to do currency hedging for the US portion (which is about half the total portfolio) of XPF's holdings, in order to remove the often dramatic swings in the US and Canadian dollar exchange rate, costs money and reduces returns, as we discussed previously in Foreign Currency: To Hedge or Not to Hedge Currency. How much return reduction there will be for XPF from hedging only time will tell but it is not negligible.

Riskiness - There are several dimensions to the relative riskiness of these funds.

Credit Risk
(the risk of the promised dividends not being paid) -
XPF has the highest number of issuers with about three times as many different companies represented in its directly held Canadian shares and in the underlying holdings of the US iShares ETF (symbol: PFF), through which it indirectly holds US preferred shares. This lessens the impact of a suspension of dividends by any single company. However, XPF has an appreciably higher concentration of its total holdings in financial services. Included are a number of US banks, an exposure that CPD does not have at all. No less than 86% of the holdings of PFF and 85% of XPF in total are in the financial sector. DPS.UN unfortunately does not reveal the sector breakdown or the Canada-US allocation so we are unable to compare this aspect of the credit risk for this fund.

The Credit ratings agencies provide ratings on the credit risk of individual preferred shares and these ratings further confirm the above indication of XPF as a more aggressive and riskier investment than its rivals. The combined ratings on both US and Canadian holdings (unfortunately and disappointingly for the investor, iShares does not give the breakdown for the Canadian holdings and we have estimated using the excellent detailed tables of Scotia McLeod's Guide to Preferred Shares Winter 2010) reveals that XPF has 26% of its holdings in securities rated lower than safe investment grade and a substantial dollop in speculative issues on the US side. By contrast, CPD has only 20% of holdings below investment grade and none of the speculative grades, making it a much safer portfolio overall, while DPS.UN only discloses the overall credit risk of its fund, which is the lower rung of investment grade, PF-2 on our table.

Interest Rate Risk
- A rise in interest rates will put downward pressure on the prices of preferred shares just as it does to bonds. The best way to assess this factor is by the type of preferred share since some types can adjust to interest rates, such as floating rate shares, and are much less susceptible to capital declines from interest rate increases. Again, Scotia McLeod's guide comes to our help with explanation and a handy chart, reproduced below, that gives a general idea of the various types of preferreds and how they compare for interest rate risk along the horizontal axis.

CPD has appreciably less interest rate risk than DPS.UN due to its much lower proportion invested in the most interest-sensitive straight perpetuals and higher amounts in the floaters. With XPF the investor is in the dark as this critical information is absent from the documentation on the iShares website.

Leverage - DPS.UN contains an additional risk factor, namely that the fund has borrowed money, which has then been invested. This is done in order to benefit from the fact that the money borrowed at prime rate, which in 2009 averaged around 3% according to DPS.UN's financial statements, can generate returns at higher dividend yields. That boosts investor returns and is evident in the higher distribution yield of DPS.UN, but it increases risk since the borrowed funds must be paid back.

In the event of a jump in interest rates, the borrow-vs-invest yield advantage would diminish or disappear at the same time that the capital value of the preferred share holdings would fall. The DPS.UN managers would then want or need to to cut down the debt but repayment would come from selling those preferred share holdings whose value had fallen. The fund and its investors could take a big hit on capital value. The question is whether the DPS.UN managers will be nimble and perceptive enough to anticipate interest changes and reduce leverage at the right time. The beneficial effect - so far - is seen in the year-to-date results as DPS.UN has gained 11.2% YTD, much more than its simple dividend yield, while CPD is much closer to its dividend yield with a 6.7% YTD gain.

Return, Yield and After-Tax Cash Flow - Both XPF and DPS.UN offer a little more than 1% higher pre-tax distribution yield than CPD.

More than 50% of the annual distributions from XPF will be taxed in a Canadian investor's hands as other income at the higher marginal rate instead of the lower eligible dividend rate. That does not matter if XPF is held in a registered account but it significantly reduces the after-tax net yield in a taxable account (e.g. if you are in the highest marginal tax bracket of 46.41% for 2010 in Ontario, that's how much you will have taken off - see this TaxTips.ca page for all the personal tax rates across Canada). Much better are both CPD and DPS.UN, which give off the tax-preferred eligible dividends (the highest Ontario marginal rate on eligible dividends is only 26.57%) as well as Return of Capital, which is not taxed immediately at all and only later as a deferred capital gain when he/she eventually sells the ETF holding (see our previous post on Calculating Capital Gains in ETFs and Mutual Funds).

Features: Distribution Frequency, Automatic & Commission-Free Purchases and Withdrawals -
For investors wanting to receive and spend / withdraw the income, e.g. while in retirement, the monthly distributions of CPD and XPF can help with budgeting and cash flow.

Another feature, free and automatic pre-authorized systematic withdrawals by selling shares, can boost the cash given off by distributions. Alternatively, in the portfolio build-up years a DRIP that reinvests the income into the purchase of extra ETF shares automatically and without trading commissions is a big convenience and cost saver. CPD offers both systematic withdrawals and DRIP as an optional choice while XPF and DPS.UN do not.

Which is best overall?
For the investor who seeks steady, reliable income with as little risk as possible, Claymore's incumbent CPD is the clear winner. Sentry's DPS.UN and the new iShares XPF are less attractive choices due to their several weak spots or unknowns compared to pluses - the extra return just doesn't seem worthwhile enough.

Disclaimer: this post is my opinion only and should not be construed as investment advice. Readers should be aware that the above comparisons are not an investment recommendation. They rest on other sources, whose accuracy is not guaranteed and the article may not interpret such results correctly. Do your homework before making any decisions and consider consulting a professional advisor.

Monday, 22 November 2010

Investment Climate Change: The Mysterious Case of Hot January Returns

Humans may affect the physical climate, but collectively our actions completely determine the investment climate. And we create some strange effects at times. One curious investment phenomenon discovered in the early 1980s is the January Effect - during January, small cap stocks typically have far outperformed large cap stocks and generally have their best month of the year.

In the best-selling book, Stocks for the Long Run, finance professor Jeremy Siegel says that US small cap stocks in the month of January over the period 1925 through 2006 had average returns of 6.1% while the large cap S&P 500 managed only 1.6%, a huge difference of 4.5%. It did not happen every single year, but in all that time, the S&P 500 beat small caps in only 16 Januaries.

The Effect is not just confined to the USA either, as the returns in many other countries, including Canada, exhibit the same pattern.

What causes the January Effect? Despite numerous studies over the many years since its discovery, there is no certain explanation, though a raft of possibilities have been suggested, including: December tax loss selling, especially by small investors who tend to dominate as small cap investors; year-end bonuses being invested; window dressing by fund managers (who sell stocks early in December to get rid of the losers and then buy them back in January); fund manager selling to lock in bonuses once the year's gains have been achieved and; year-end availability of accounting and investment performance data that drives buying.

Does this provide a sure-fire way to make profit? Given that the Effect has been observed most years and that we know that the exact time during which the major gains occur is from the last few trading days in December to mid-January, one could follow the simple trading strategy - buy small caps at the end of the year and sell at the end of January, or perhaps temporarily swap out of large caps into small caps. The problem is that word has got round and other investors have evidently already been doing this (or perhaps the underlying causal conditions have changed). The January Effect has diminished considerably in recent years. Anthony Yanxiang Gu's The Declining January Effect: Experience of Five G7 Countries 2006 paper says it has gone down in Canada, France, Germany, Japan and especially in the UK. In the USA, according to The Disappearing January/Turn of the Year Effect: Evidence From Stock Index Futures and Cash Markets written in 2004 by Andrew C. Szakmary1 and Dean B. Kiefer, the Effect has gone away entirely. For more info, see Behavioural Finance's annotated and linked list of January Effect research papers.

Is the Effect reduced but not gone? Let's see what has happened in recent years since these studies. Our table below uses familiar ETFs to represent markets in the USA - Large Caps by SPDR S&P 500 ETF (symbol: SPY) and Small Caps by iShares Russell 2000 Index (IWM) - and in Canada - Large Caps by iShares S&P/TSX 60 Index Fund (XIU) and Small Caps by iShares S&P TSX Completion Fund (XMD). In only two of the last five years has it happened in the USA but it has continued in four out of five years in Canada. So maybe, in Canada at least, the Effect is down but not out.

The big question is whether it is worth trying to make a trading profit on the phenomenon. That is a decision every individual investor must make for him or herself. It may be helpful to note that Gu found the Effect to be weaker during periods of slow GDP growth (nowadays), during high inflation (not really the case today) and during high market volatility (can change radically in an instant - one way to check is the CBOE Volatility Index).

How to trade on the January Effect:
  • buy and sell ETFs as the above text describes
  • buy Call options or futures on small cap ETFs or indices, such as the CBOE describes for the USA on the Russell 2000 Index on this page; in Canada, unfortunately there do not seem to be available either custom futures designed to exploit the Effect, or Call options on the Montreal Exchange, where options are traded. Or maybe this is fortunate since the lack of cheap and easy ways to exploit the Effect in Canada, may be helping to keep it from disappearing!
The investment climate has likely changed and what used to be a hot investing wind may be more like a warming January thaw. That's still much more welcome than a severe cold snap.

Disclaimer: this post is my opinion only and should not be construed as investment advice. Readers should be aware that the above comparisons are not an investment recommendation. They rest on other sources, whose accuracy is not guaranteed and the article may not interpret such results correctly. Do your homework before making any decisions and consider consulting a professional advisor.

Tuesday, 16 November 2010

Commodity ETFs - Ins and Outs for Canadians

In our post last year Commodities: Diversifier and Inflation Hedge or Empty Promise? we suggested that ETFs are a good way to invest in commodities. However, controversy has erupted in the mainstream financial press, with articles such as Business Week's Amber Waves of Pain and GlobeInvestor's How to play commodities and not get trampled touting the poor returns of some commodity ETFs, claiming this is due to a charmingly named condition called contango (in which the spot price of a commodity is lower than the upward rising shape, as time to maturity increases, of the futures price curve). Is this a true problem and does that mean an investor should give up on the idea of commodity ETFs? Let's have a look.

Contango is NOT the Dance of Decline
Perhaps contango, not to be confused with the tango, sounds like it should be a dance but it isn't, and so should it not be assumed that it will cause investment losses. The notion that contango inevitably entails return losses gets a debunking from commodities trader George Rahal in Contango, Backwardation and Commodity Index Returns, published in April this year. He finds that, amongst the 15 commodities he tested, gold and silver have been in contango every single year from 2000 to 2009 yet have managed very healthy returns. Testing the opposite condition of backwardation, where futures prices are lower than the spot price, he finds it is not a sure-fire way to profits. He concludes that "there appears to be no clear relationship between “contango and losses” and “backwardation and profits”", which he remarks is consistent with market efficiency. Instead he says the problems lie with index construction which specifies too-frequent and too-near the present month rolling (selling a contract about to expire for one further in the future). Author Rahal explains further his findings in an interview on HardAssetsInvestor.com.

Index Construction is Key to a Commodity ETF's Success
Here is what he suggests looking for in an ETF's index for use by a passive long-term investor as an asset allocation in a portfolio (i.e. not using commodities for speculation or to beat the market):
  • infrequent rolling of futures contracts, ideally once per year
  • rolling contracts further into the future, especially not the nearest month ahead
  • a stable index with minimal changes to commodities and to their weight
In addition, an index should have broad exposure to multiple different commodities to dampen the volatility of individual commodities and to achieve diversification.

How do the Main ETFs Compare?
In the table below, we compare the five largest commodity ETFs available through US exchanges and the single Canadian entrant. Only broad multi-commodity ETFs are included (see ETFdb's list of the whole category) though there are many single commodity ETFs as well. The following table shows the details of key characteristics of the main ETFs. We will focus on the index construction aspects and one matter of concern especially to Canadian investors and note below other factors assessed in two other reviews.

Roll Method
DJP and GSG both suffer from frequent rolling to near-term contracts, while DBC and CBR attempt to combat the assumed problem of negative roll yield through active techniques. RJI and GCC follow a more desirable policy of rolling to longer-dated contracts.

Diversification and the Make-up of Canadian Equity
Within an asset allocation, a Canadian investor is likely to have a big holding in a Canadian equities ETF, such as the iShares Capped Composite Index Fund (XIC), which already has a substantial 26% in energy and 23% in materials (i.e. metals and minerals). A Canadian should not want to load up on more assets in those sectors. GCC fits the bill best in that regard with by far the lowest amount in the energy sector - only 18% - though DJP at 27% is much lower than the others in 40-70% range. CBR seems to have a low allocation but we cannot be sure since the entire sector allocation is not disclosed by Claymore.

The other aspect of diversification is simply the number of commodities and the resultant concentration in any single one. RJI wins that contest hands-down with 37 commodities in its index, including the intriguing Azuki beans and greasy wool.

Other Factors - MER Costs, Bid-Ask Spreads, Risks, Downside Volatility, Past Returns
Barchart has an excellent review of the US-traded ETFs in Our Pick for a Broad Commodity Index Exchange-Traded Product and ends up rating GCC the best pick and DBC in second. Making Sense of Commodity Products at Hard Assets Investor rates DBC highest and GSG second.

Best Overall
GCC takes our winner's laurels due to the particular sector mix of importance to a Canadian and its roll method but one should be aware of its much higher past volatility and downside variance. DBC will be attractive to those who like its low past volatility and downside variance and who believe that its active roll method has merit.

Disclaimer: this post is my opinion only and should not be construed as investment advice. Readers should be aware that the above comparisons are not an investment recommendation. They rest on other sources, whose accuracy is not guaranteed and the article may not interpret such results correctly. Do your homework before making any decisions and consider consulting a professional advisor.

Wednesday, 10 November 2010

Entertainment Companies: Potential Investment Thrills or Spills?

Statistics Canada publishes lots and lots of data with our tax dollars so it is pleasant to find that some of it, in the form of summary tables on the financials of industry sectors, can give us leads for potential investments. Table 1-4 tells us the Return on Equity for five years from 2004 to 2008. When we sift through the numbers, we find that the Arts, Entertainment and Recreation industry leads the pack with phenomenally high ROE of 60% or more. It has been consistently high as well. That looks promising, so let's use the same process we applied in Food Companies to Satisfy Investment Hunger to narrow the field to the most promising companies.

1) Finding the Candidate Stocks
Our first stop is a stock screening tool such as GlobeInvestor's, which includes the option to select an industry sector, in this case Entertainment. Your discount broker website will have a stock screening tool too; in BMO InvestorLine's case, it is the enhanced version of the Globe tool. The search pulls up 11 securities. Astral Media has two classes of shares under TSX trading symbols ACM.A (non-voting) and ACM.B (voting) so we will look only at figures for ACM.B. Cineplex Galaxy's CGX.DB listing is a debenture so we'll ignore it. That leaves us with 8 common stocks and the Cineplex Galaxy income trust .

2) Companies with Consistent Profitability
Our next step is to find the companies that are consistently profitable. To do that, we go to the Toronto Stock Exchange's investor website TMX Money and:
  • type in the stock symbol for each of the 9 candidates, then
  • click on the Financials tab and
  • pick the Income Statement and Annual View from the drop down menus
TMX shows the most recent five years of results. We select only those companies where there has been a profit i.e. whose Net Income has been positive, for at least four out of the last five years. That leaves us with five companies.
  • Great Canadian Gaming Corp (symbol: GC) - operates casinos, thoroughbred and standardbred racetracks, a community gaming centre, a hotel and conference centre, two show theatres, a bingo hall and food and beverage and entertainment facilities.
  • Cineplex Galaxy Income Fund (CGX.UN) - is the largest motion picture exhibitor in Canada, and leases or has a joint-venture interest in 129 theatres with 1,342 screens serving approximately 70 million guests annually. Like almost every other income trust facing the upcoming federal tax rule change, it intends to convert from an income trust to a corporation structure on January 1, 2011.
  • Canlan Ice Sports Corp (ICE) - develops, operates and owns multi-purpose recreation and entertainment facilities, mainly for ice sports and indoor soccer.
  • Astral Media Inc (ACM.B) - engages in the business of specialty, pay, and pay-per-view television broadcasting, radio broadcasting, and outdoor advertising in Canada
  • Corus Entertainment Inc (CJR.B) - has interests in radio broadcasting, television broadcasting and the production and distribution of children's media content.
3) Profitability, Growth and Value
The main initial indicator of potential value is a stock's Price to Earnings (P/E) ratio. Three of five of our profitable companies - ICE, ACM.B and CJR.B - exhibit a much lower P/E of between 11 and 14 compared to the 19.2 average of the TSX Composite (as of Nov. 4th). That is encouraging for our candidates. The other two have a P/E of about 21, a bit higher than the TSX, indicating the market is already anticipating higher growth for them.

The big surprise is that none of the companies carries a Return on Equity (ROE) anywhere near the stratospheric numbers of the Stats Can tables. This is a puzzle to which we can see no obvious answer. Private companies in the Stats Can data set (i.e. not publicly traded companies) might skew the data upwards, though it is hard to imagine how the effect could be so great.

4) Safety
Astral Media has a very strong ability to cover its interest expenses with good conservative numbers across the three factors to assess safety - debt/equity ratio, interest coverage and dividend payout. Great Canadian Gaming and Canlan have merely adequate safety numbers. Cineplex has a worrisome high payout ratio with cash distributions well above earnings, though the company maintains in its 2009 annual report that such a level of distributions is sustainable and it intends to pay out the same amount as dividends after conversion to a corporation. Corus is barely generating enough profit to pay its interest costs, not a good situation at all.

5) Returns and Market Sentiment
The market appears to feel that the future is rosy for all but Great Canadian Gaming as the share price appreciation of the four others has outstripped the TSX Composite by a significant margin as the Google chart image snapshot below shows (click here for live updated chart).

Analysts like them too and give four star ratings, as compiled by GlobeInvestor, for the four, excluding Great Canadian Gaming again. The average analyst recommendation is BUY for Cineplex, Astral and Corus (no rating is available for Canlan). Great Canadian even garners a Moderate BUY.

6) Past vs Future Returns
The good recent price rise of these stocks is nice but the future is what counts. The analysts' 12 month target price ranges suggest upside potential on average though some predictions are below current prices. We reiterate our caution about analysts made in Stock Market Analysts: add Salt and Pepper. Is the best behind us for these stocks? The numbers as a whole reveal no company with strong numbers across the board as some area or other is less than ideal in every case.

There is certainly more investigation and consideration required before deciding to buy shares in any of these companies e.g.
  • Will Astral Media again suffer a huge impairment charge against its assets as it did in 2009 and is the low P/E a sign of upside potential?
  • Is Cineplex's payout sustainable and is the stock already fully valued?
  • Can Canlan continue to grow and is its debt level a possible problem? (see TMX's Scorecard report here)
  • Can Corus find a way to grow revenues, to cope with its debt and will it need to cut its dividend?
  • Can Great Canadian Gaming start growing revenue again?
As with the products these entertainment companies provide, where the outcome of the plot or the game might provide thrills or spills, so could the investment result and you need to put chance on your side with thorough due diligence. The misleading Stats Can data is in itself a warning sign not to take only one piece of information as a definitive indicator. However, if you are a stockholder, you can at least be happy that you are paying yourself back a little when you watch that movie, make that bet or take that slapshot.

Disclaimer: this post is my opinion only and should not be construed as investment advice. Readers should be aware that the above comparisons are not an investment recommendation. They rest on other sources, whose accuracy is not guaranteed and the article may not interpret such results correctly. Do your homework before making any decisions and consider consulting a professional advisor.

Wednesday, 3 November 2010

Which Bond ETFs are Most Vulnerable to a Rise in Interest Rates?

Interest rates are still at historic lows but they have only been maintained at such levels due to economic conditions. When interest rates rise, the price of bonds will fall (for a straightforward explanation of why this inverse effect occurs, see Investopedia's article on the question) as investors demand a higher rate of return. Bond ETFs are collections of individual bonds with varying maturities and coupon rates. Thus, a rise interest rates rise will see the value of bond ETFs fall and inevitably the market price of bond ETFs will fall too.

How do we measure the effect? The answer is a metric called Duration, which measures the amount any one bond, or a collection of bonds, will react to interest rate changes.e.g. a duration of 5 means a 1% rise in interest rate / required investment return will cause a 5% fall in price.

Fortunately the ETF providers do the fairly complicated calculation of Duration (see the Gummy bond tutorial II from the Financial Webring to see the math) for us and we only need to look it up on their respective websites. Let's have a gander at the range of Canadian bond ETFs to find out how much interest rate exposure we investors face in buying these funds today. We'll see that there is wide range amongst bond funds.

Durations of Canadian Bond ETFs
(click on image for details)

The lessons of the comparison table follow common sense:
  • Short maturity funds of five years or less have substantially shorter Durations (around 3) and sensitivity to possible interest rate increases while funds with long-dated maturities are the most susceptible (around 12-13).
  • All-inclusive broad market funds have a mid-range Duration of about 6.
  • There is a general pattern of higher yield for higher duration - other things being equal, the more interest rate risk one is prepared to take on, the higher the yield.
  • While Duration may be the same, all sectors are not the same, especially with regard to credit risk (the risk of not getting paid). This risk is reflected in higher yields for corporate over government bonds. The iShares DEX HYBrid Bond Index ETF (symbol: XHB), with its holdings of higher credit risk corporate bonds yields the most of all.
  • A seeming anomaly is the combination of very low yield and very high duration of the two real return bond ETFs, iShares ' XRB and BMO's ZRR, which mainly contain bonds issued and guaranteed by the Canadian government. Are investors in these funds somehow in a very bad deal? Not necessarily ... A major cause and component of higher interest rates is inflation. Real return bonds include an automatic ratcheting mechanism for CPI increases that protects against inflation. Compare ZRR and XRB with ordinary long maturity and long Duration bonds issued by the Canadian government, e.g. in BMO's ZFL fund. They do not contain any ratcheting for inflation, though they do incorporate an inflation expectation roughly equal to the difference in yield with the real return bonds, in this case about 3.3% - 1.1% or 2.1% per year. If inflation spikes up above 2.1%, XRB and ZRR investors are protected but ZFL owners lose (as do all the other bond ETFs). The protection is worth a lower yield.
A few caveats - the Duration formula of x% price change per 1% change in interest rates isn't exactly uniform and linear. At low yields, such as those prevailing nowadays, Duration changes faster than interest rates, so the formula exaggerates a bit. Duration is most accurate for small changes in interest rates, say +/ 1% - beyond, that the effect becomes less and less and pronounced in a way beneficial to the investor - a big rise in interest rates makes a lesser bond price hit and a big fall makes more of a price rise.

Interest Rate Increase Protection Options
  • The obvious tactic is to buy into funds with shorter Duration, though as we observe, there is loss of yield
  • Another strategy is to try to, as the finance textbooks say, immunize your bond holdings by matching Duration with your investment time horizon. See this brief explanation on eHow.com, the key sentence of which is "When the duration of a bond or a bond portfolio is equal to the investor's expected investment horizon, the investor will be immunized against interest rate risk." In other words, match the Duration of your bond holdings with the time when you will need the money. A key assumption is that the interest is reinvested (ETFs such as those of BMO and Claymore that let you choose to DRIP automatically instead of having to buy new shares on the market are very useful in that regard). If you do not reinvest, the gain on the higher interest rate from new investments will not be there to offset and compensate for the initial loss of capital/share price when interest rates rise and you the investor will be a net loser in the process.
  • Buy actively managed bond mutual funds, whose managers try to figure out the direction and amount of future interest rate changes to change the bond portfolio in advance. You rely on the skill of the manager and as usual, past successful performance may not be repeated; in fact, most active mutual funds do worse than than a passive index and finding the ones who will be successful is hard. To get a list of bond mutual funds, use the fund filter of your discount broker or the free Fund Filter at GlobeInvestor. All of the ETFs in our table are passively managed funds that merely try to reproduce the performance of a representative set of bonds according to sector and market cap.
Interest rates will inevitably rise when conditions improve, the only question being how soon that will happen. Be ready!

Disclaimer: this post is my opinion only and should not be construed as investment advice. Readers should be aware that the above comparisons are not an investment recommendation. They rest on other sources, whose accuracy is not guaranteed and the article may not interpret such results correctly. Do your homework before making any decisions and consider consulting a professional advisor.