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I am looking at some Canadian bond funds (recommendations welcome) for my RRSP. Relatively safe, and with a dividend yield ~ 3% is good enough. While looking at Fidelity bond funds, I came across this fund

My questions are: This does not say anything about the distributions/yield etc. i.e How much does it pay out in dividends over the year? The fund gets income from coupons, does it automatically reinvest them?

Why does it have such a high beta of 0.98? Bonds are supposed to provide diversification, how come it has such a high correlation with the beta?

Is the Beta calculated w.r.t S&P500 or some Canadian index like TSX 60?

Chris W. Rea
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Victor123
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1 Answers1

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Beta is calculated using the benchmark:

Fund benchmark** FTSE TMX Canada Universe Bond Index

this is from the bar on the right hand side. Beta measures only how closely a fund's returns follow a benchmark and a beta of 0 < beta < 1 means that the fund is correlated with the benchmark but under-performing the benchmark, a beta > 1 would mean that it is out-performing the benchmark. 0.98 is not a high beta but it does mean that the fund is sticking very closely to the benchmark (a beta of 1 would be the same return as the benchmark). Given that the fund consists of bonds that are only in the universe defined by the benchmark it is only the exact constitution of the fund that differs from that benchmark (the exact bonds differ). That the fund can only contain instruments within the benchmark's universe it cannot be more diversified than the benchmark.

In general bond funds reinvest coupon payments to prevent having to pay cash out frequently and to simplify ownership. The return on the fund includes coupon payments and any losses to defaults etc..

note: I am making some assumptions based upon GIPS reporting standards because I am working in that domain currently.

MD-Tech
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