Global Bond Investing offsets some of the challenges of Canadian Debt Markets

TORONTO, May 31, 2011 /CNW/ - A recently released study by Russell Investments makes the case for global bond investing to offset some of the structural inefficiencies and challenges of the Canadian debt markets, and potentially offer greater upside potential.

The report suggests that despite the fact that Canadian debt markets have withstood the financial crisis better than most global bond markets, bond portfolios concentrated in Canada may face challenges that could limit potential returns due to the smaller investment opportunities available in this country compared to the larger international bond markets.

"In this post crisis world, the fixed income landscape globally is experiencing structural changes," said Greg Nott, Portfolio Manager, Russell Investments Canada. "While Canadian fixed income investors have historically benefited from stable returns from the Canadian bond sectors, our empirical analysis has shown that returns for global bond investors are not a lot more volatile. Our conclusion is that investors can significantly enhance their upside potential by including global bonds in their portfolios with only an incremental increase in volatility."

The study also addresses the question of whether Canada offers better credit risk relative to global markets, and concludes that historical default and recovery rates show that Canadian bonds offer no meaningful credit risk advantage over global bonds.

"Some investors believe that owning non-Canadian bonds means taking on greater risk," said Bilal Naqvi, Senior Analyst, Fixed Income. "In fact, when we compared bond indices, we found that the key US market benchmark, ie.e. Barclays US Aggregate has a significantly higher percentage in the AAA bucket at 78%, compared to the Canadian index at 52%. So, investors who stay close to the Canadian index as  matter of risk avoidance do not necessarily have a credit quality advantage."

The study goes on to conclude that by staying only in Canadian sectors, investors limit the substantial total return opportunities available in global bonds. For example, the highest return investors have earned from a Canadian Fixed Income sector is 16.3% from Canadian corporate bonds in 2009. Other than 2009, Canadian bond market returns have been in the single digits. By comparison, historical returns have been much higher for global bond markets and sectors.

A full copy of the study is available at

About Russell

Founded in 1936, Russell Investments is a global financial services firm that serves institutional investors, financial advisers and individuals in more than 40 countries. Over the course of its history, Russell's innovations have come to define many of the practices that are standard in the investment world today, and have earned the company a reputation for excellence and leadership.

Through a unique combination of wide-ranging and interlinked businesses, Russell delivers financial products, services and advice. A pioneer, Russell began its strategic pension fund consulting business in 1969 and today is trusted by many well-known worldwide institutions for investment advice. The firm has $154 billion CDN in assets under management (as of 12/31/10) in its mutual funds, retirement products, and institutional funds, and is well recognized for its depth of research and quality of manager selection. Russell offers a comprehensive range of implementation services that helps institutional clients maximize their assets. The Russell Indexes calculate over 50,000 benchmarks daily covering 65 countries and more than 10,000 securities.

Russell is headquartered in Seattle, Washington, USA with offices in Amsterdam, Auckland, Chicago, Johannesburg, London, Melbourne, New York, Paris, San Francisco, Seoul, Singapore, Sydney, Tokyo and Toronto. Russell Investments Canada Limited is a wholly-owned subsidiary of Frank Russell Company. For more information about how Russell helps to improve financial security for people, visit us at

Important Information

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing.

Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

Nothing in this publication is intended to constitute legal, tax securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. This is a publication of Russell Investments Canada Limited and has been prepared solely for information purposes. It is made available on an "as is" basis. Russell Investments Canada Limited does not make any warranty or representation regarding the information.

Russell Investments and the Russell Investments logo are registered trademarks of Frank Russell Company, used under license by Russell Investments Canada Limited.

Copyright © Russell Investments 2011. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments.

Date of publication: May 2011


SOURCE Russell Investments Canada Limited

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