Montreal-based Desjardins Investments said Wednesday it is reviewing the proposed character conversion changes in the federal budget to determine the potential impact they could have on Desjardins Capital Yield Bond Fund’s trading.
Under the new rules provided in the budget, the gain realized on the close-out of certain derivative forward agreements would be treated as ordinary income rather than capital gain. This measure would apply to forward agreements entered into after March 21.
Budget measures likely to prevent special contracts that convert interest to capital gains
The investment strategy of the fund uses forward agreements to create a tax-efficient distribution for its unitholders.
As details are limited at this point, the Desjardins Investments says it will await further guidance from the federal government on the implementation of the new changes and will make further announcements as necessary.
The fund is included in the Chorus II Corporate Class Portfolios, held in non-registered accounts, which are the largest investors in the fund.
“Based on additional information expected from the Federal Government, we will undertake a thorough analysis and make the necessary changes to the portfolios in order to ensure a tax-efficient solution for our unitholders,” the company said in a release.