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Dagmara Fijalkowski

What are RBC Fixed Income Pools?

Fixed income pools are three solutions that were created to fill the need for well diversified fixed income exposure in clients’ portfolios, much better than holding individual bonds. They were designed in 2018. At that time, we were very concerned about the growing stock of long-term debt in the world. And, we were thinking about the fact that the investment grade universe of Canadian bonds has longer and longer duration, generally, over recent years, it's been between seven and eight years.

Fixed income pools have been designed to have shorter duration, between four and six years, which means they have much lower sensitivity to interest rates. When constructing the pools, we employed a few key strategies to build these portfolios. First, a well-designed strategic asset mix, which diversifies interest rate exposure globally, including management of currency exposure.

Second, employing multiple credit levers that are not perfectly correlated with each other. Thirdly, actively managing exposures, not just within funds, but also at the pool level. And finally keeping costs and fees low thanks to a focus on best execution, access to institutional transaction costs, and all sorts of efficiencies that we as a large asset manager have.

Has your approach in managing the pools changed since they were launched in 2018?

The interest rate environment is vastly different now than it was six years ago when we designed the pools.

Yields are now at more normal levels and that bodes well for future returns in fixed income. At the same time, the stock of debt outstanding globally has continued to grow, giving more opportunities to active management, when managers can choose credits that are more, likely to appreciate. That can be accomplished through having, deep teams doing research inside our company.

Our approach to the pools is evolutionary rather than revolutionary. We constantly are reviewing the changes in the market and, and make sure that we grow our capabilities to be able to manage these different aspects of the market. Since launching the pools, we continued to tweak the exposures that are embedded in the pools. And we have added several asset classes where the team, has or has developed capabilities.

Disclosure

Please consult your advisor and read the prospectus or Fund Facts document before investing. There may be commissions, trailing commissions, management fees and expenses associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. RBC Funds, BlueBay Funds and PH&N Funds are offered by RBC Global Asset Management Inc. and distributed through authorized dealers.