Mackenzie Financial Corp. is launching a new high yield corporate bond fund that will provide investors with tax-efficient returns, the company announced on Thursday.

The Mackenzie Sentinel North American Corporate Bond Class, available for purchase on Friday, aims to provide investors with the returns of a high-yield fixed income fund in a tax-efficient manner.

“Many investors today want to receive steady, reliable income from their investments, and corporate bond funds can comprise a component of such a portfolio. However, traditional corporate bond funds distribute interest income, which is fully taxable,” says David Feather, president of Mackenzie Financial Services Inc. “Mackenzie Sentinel North American Corporate Bond Class provides investors with the ability to receive tax-efficient monthly distributions.”

As part of Mackenzie Investment’s Capitalcorp structure, Mackenzie Sentinel North American Corporate Bond Class offers investors the ability to switch between the Fund and more than 50 other Capitalcorp funds on a tax-deferred basis.

“This is a tremendous advantage for taxable investors, as they may not pay any taxes until they redeem out of the structure,” says Feather.

The fund is available in two different series, letting investors choose the income stream that best suits their financial planning requirements. Series A is suitable for investors who are seeking exposure to the high yield fixed income class, but do not require regular cash flow.

Series T6 securities are designed for investors looking for regular cash flows, providing monthly distributions at a rate of 6% per year, generally in the form of tax-efficient return of capital.

In addition, a registered version of the fund is available. Monthly distributions on the registered fund are based on the fund’s net income for the month and are automatically reinvested in additional securities the fund.

Lead manager for both funds is Dan Bastasic, vice president of investments at Mackenzie, who has been lead manager on the Mackenzie Sentinel Corporate Bond Fund since January 2003.

Feather notes that historically, high yield corporate bonds have outperformed equities coming out of recessionary periods.

“If history is any guide, an investment in either of these funds appears to be a timely opportunity for investors looking for income and long-term capital growth,” he says.

New short-term government bond fund

Mackenzie also announced on Thursday that it is launching the Mackenzie Sentinel Short-Term Government Bond Fund, which aims to provide a higher return than traditional money market instruments through investment primarily in a diversified portfolio of short-term government bonds.

The new fund, also available on Friday, will invest in bonds issued or guaranteed by Canadian federal, provincial or municipal governments with an average weighted term to maturity of three years or less.

“Money market funds are still a popular place to park short-term assets, but with the yields on many of these funds at or close to zero, many investors are looking for an alternative,” says Feather. “Mackenzie Sentinel Short-Term Government Bond Fund is a solution for investors who are seeking higher yield than is currently available on money market instruments, without any corporate credit risk exposure.”

Lead manager for the fund is Chris Kresic, senior vice-president of Investments and team lead of the Sentinel investment team at Mackenzie. Kresic is the lead manager on several fixed income and money market funds.

IE