Invesco Canada blog

Insights, commentary and investing expertise

Christopher Doll | November 8, 2016

Looking to avoid the pitfalls of market-cap indexing?

Investors tracking market-cap-weighted indices may be exposed to several flaws inherent to that approach. A rules-based Fundamental Index® approach focuses on the strength of the underlying business by looking at sales, cash flow, dividends and book value.

Scott Boniferro, Vice President, Global Investment Strategist, Invesco Canada, joined Larry Berman on BNN’s Berman’s Call to discuss the benefits of a Fundamental Index® strategy and the differences between this rules-based approach and a traditional market-cap-weighted ETF.

Name 1-yr 3-yr 5-yr 10-yr Since inception Inception date
PowerShares FTSE RAFI Canadian Fundamental Index ETF 17.13 5.81 7.45 1/10/2012
iShares Core S&P/TSX Capped Composite Index ETF 12.65 6.49 6.85 4.63 6.28 2/16/2001
PowerShares Fundamental High Yield Corporate Bond (CAD Hedged) Index ETF 7.26 3.93 5.39 5.10 6/21/2011
iShares U.S. High Yield Bond Index ETF (CAD-Hedged) 7.08 3.13 5.65 6.40 1/21/2010
PowerShares 1-5 Year Laddered Investment Grade Corporate Bond Index ETF 3.19 2.96 3.02 3.18 6/15/2011
BMO Short Corporate Bond Index ETF 3.06 2.84 2.93 3.29 10/20/2009
RBC 1-5 Year Laddered Corporate Bond ETF 3.04 2.83 1/9/2014

 

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Investors should be aware of the risks associated with data sources and quantitative processes used in our investment management process. Errors may exist in data acquired from third party vendors, the construction of model portfolios, and in coding related to the Index and portfolio construction process. While Research Affiliates takes steps to identify data and process errors so as to minimize the potential impact of such errors on Index and portfolio performance, we cannot guarantee that such errors will not occur.

“Fundamental Index®” and/or “Research Affiliates Fundamental Index®” and/or “RAFI®” and/or all other RA trademarks, trade names, patented and patent-pending concepts are the exclusive property of Research Affiliates, LLC.
FTSE TMX Global Debt Capital Markets Inc. (“FTDCM”), FTSE International Limited (“FTSE”), the London Stock Exchange Group companies (the “Exchange”) or TSX Inc. (“TSX” and together with FTDCM, FTSE and the Exchange, the “Licensor Parties”). The Licensor Parties make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE TMX Canada Investment Grade 1-5 Year Laddered Corporate Bond Index, FTSE TMX Canada Ultra Liquid Long Government Bond Index and FTSE TMX Canada 1-3 Year Laddered Floating Rate Note Index (“the Indexes”) and/or the figure at which the Indexes stand at any particular time on any particular day or otherwise. The Indexes are compiled and calculated by FTDCM and all copyright in the Indexes’ values and constituent lists vests in FTDCM. The Licensor Parties shall not be liable (whether in negligence or otherwise) to any person for any error in the Index and the Licensor Parties shall not be under any obligation to advise any person of any error therein.

“TMX” is a trademark of TSX Inc. and is used under licence. “FTSE®” is a trademark of FTSE International Limited in Canada and Taiwan, and “FTSE®” is a trademark of the London Stock Exchange Group companies in the rest of the world, and is used by FTDCM under licence

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