Investment Q&A

Floating rate interest on bonds fluctuates with rates, and thus their trading value is less sensitive to rates than 'regular' bonds are. The Renaissance Fund has a 6% since-inception return. But its performance in the recent three years has been much better than many bond funds. When rates rose with inflation, many bonds got hit very hard. Floating rate bonds pay more in such scenarios, so market value held up better. It was up 9% last year. With lower rates, it will of course not see the same gains that other bonds will. So, much depends on what one's rate expectations are. We think the fund has performed as expected. It did lose money in 2017. A fund like XLB is longer duration, and will have more rate leverage (both ways). While it has a pretty weak 5-year return (-2.67%) it is up 7.16% in the past three months alone, as Canadian rates started to move lower. Longer bonds will definitely outperform, if rates continue to move lower. But that does not make floating rate funds 'bad', just different.