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I have been looking at Criterion Canadian Convertible Bond Fund. It's the only fund of this type for Canada. It seems to be doing well but has a 1.90% MER.
The only other route is XHY but that's USA high yield bonds. Any thoughts on this company or the fund?
 

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Go with the US fund. MER is much lower, it's hedged to CAD and much more diverse pool of companies, which is very, very important with high yield. Also, Claymore has a fund that tracks the same index but pays return of capital which is nice for non-registered accounts/tax purposes. This is done with a forward agreement.
 

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I was interested in this fund as it's the only Canadian convertible bond fund out there. I'm not interested in USA high yield bonds. This fund has 156 companies and is averaging 7.16% yield over an average of 4 year maturity. The only downside I agree is the MER.
 

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jcub were you not here quite recently; and you presented the mutual fund recommendations of your advisor at that time; and a number of people here took care to point out to you how self-serving the advisor's recommendations were, and how flimsy his suggestions were; and how he was basically looking for extra commissions for himself. That was you, right ?

now here you are back again, this time presumbly with another advisor, and again you are presenting exactly the same kind of low-quality suggestion.

there is no reason to buy this fund imho. It was only launched 4 months ago, so it has no official "return" that it dares to publish (they are required to have a full year of operations before they can claim specific returns or yields.)

there are ugly load fees. I for one cannot fathom why anyone would pay a load fee to purchase a bond fund.

lastly, on the notion of an all-canadian convertible bond fund. The debentures this fund contains are all below investment grade. Many of them were issued with the proviso that at maturity they could, instead of being redeemable with cash at par, be converted into the underlying unit trust. With the exception of the REITs these trusts will convert to corporations by january 2011 - that's just over 8 months away - and their share prices after conversion could fall badly. In order words, what this bond fund could end up owning in less than a year is convertibility into a basket with a high proportion of poor-quality common stock.

to use a raw word for these debentures, they are junk bonds. Generally, savvy managers of junk bond portfolios buy these in the US, because there is a far greater choice and a better chance of finding better quality among what are basically off-the-rack cheap goods at firesale prices. Marret, Onex & Gluskin Sheff, for example, buy US distressed corporate bonds for their junk bond sectors, they don't buy canadian.

cub, if you feel you must buy junk bond funds, you should understand that all of them are presently yielding 7% and north, but they could be negatively impacted when interest rates start to rise. There are at least 2 in canada with unusual and favourable tax consequences. They are structured so that their distributions are return-of-capital and not interest, which means that upon eventual disposition these distributions will be favourably taxed as capital gain instead of interest. Both these funds are ETFs, so one buys them on the toronto stock exchange. They are Marret hi-yield (mhy.un) and Onex partners credit risk hi-yield (ocs.un). Their portfolios contain US distressed corporates only. Both Marret and Onex have good reputations for managing distressed risk.

it is possible that your present advisor is licensed to sell mutual funds only & won't be able to handle a tsx trading order. In that case, perhaps you could come back here & people could try to find you a low-MER no-load corporate bond fund that would at least have a trackable history. Or perhaps you could find an advisor who is licensed to sell stocks as well as mutual funds.
 
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