Way back on February 20th, 2013 we posted a blog regarding a switch our preferred share recommendation from iShares S&P/TSX Canadian Preferred ETF (CPD) to Horizons Active Preferred ETF (HPR). (Access Blog Posting Here ).
The decision was the right one.
As can be seen below the HPR has outperformed the CPD by over 2% per year. The challenge for some investors, however, was that there was no way to guarantee the future performance of HPR would be stronger than CPD, and there were transactional costs involved with making such a switch.
There continues to be some debate regarding the value of active versus passive management. NASH Family Wealth Management believes that both approaches can be appropriate in different parts of a portfolio. In the case of preferred shares, the illiquid nature of the underlying holdings often makes it advantageous to have some level of active involvement. The CPD is a pure index play with its underlying securities rebalanced only quarterly.
Redwood Asset Management first launched a preferred share mutual fund in 2004. The fund was okay, but volatile, and not one that made our list of recommended funds. In January 2015 Steve Vannatta took over the mandate and achieved top decile (top 10%) performance in both 2015 and 2016, a very impressive accomplishment.
In March 2017 Redwood launched an Exchange Traded Fund (ETF) version under the symbol ‘RPS’.
On September 15th, 2017 Redwood will be accepting select preferred share stocks and ETF’s in exchange for units in the Redwood Canadian Preferred Share ETF (RPS). The exchange will take place using a 5 day average trading price and will be done without transaction costs.
We are recommending that all holders of the iShares S&P/TSX Canadian Preferred ETF (CPD) submit their shares for conversion. This is an ideal way to move into an actively managed ETF without transactional costs.
The securities or sectors mentioned herein are not suitable for all types of investors. Please consult your investment advisor to verify whether the securities or sectors suit your investor’s profile as well as to obtain complete information, including the main risk factors, regarding those securities or sectors.
** I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial **