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Index IDEA: Data shows more diverse returns outside Canada for Canadians

Numerous factors, including a preference for the familiar, may play a role in home country bias, or the tendency for market participants to favor investments in their home market. However, investing solely in higher yielding Canadian stocks may cause Canadian market participants to miss opportunities for global diversification.

The FTSE Global Sustainable Yield Index Series was designed to measure the performance of stocks of companies within various global countries and regions that exhibit relatively high and sustainable yields. And, while the FTSE Canada Sustainable Yield 150 10% Capped Index had a 4.68% annualized return over the last decade, the chart below illustrates the diverse set of index returns and standard deviations that were experienced by indexes capturing higher yielding stocks in many other global regions beyond Canada for the same time period.

FTSE Russell Index Returns as of March 31, 2016

FTSE Russell Index Volatility as of March 31, 2016

Brad Zucker, Senior Product Manager at FTSE Russell:
“The FTSE Global Sustainable Yield Index Series was developed to address the drawback in some high yield indexes that higher yielding stocks are included without reference to the likelihood that a dividend will be paid. FTSE Russell applies four stringent screens, with a focus on the financial and operating strength of prospective constituents, including those with strong balance sheets and the ability to generate cash flow. As a result, the indexes include a basket of securities in various global regions with relatively high and sustainable yields.”

Keith McLean, President & CIO, Sphere Investments:
“Canadian retail investors have one of the most acute cases of home country bias in the world, with approximately 55% of investments allocated to the domestic market, while Canada’s market only represents roughly 3.5% of the entire world market. These investors lack the portfolio diversification needed to survive periods of market uncertainty. The FTSE Global Sustainable Yield Index Series is a helpful tool for Canadian market participants looking to build a portfolio with blended global exposure, designed to provide access to various global countries and regions while not giving up return.”

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FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.

All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

Views expressed by Brad Zucker and Keith McLean of Sphere Investments are as of April 28th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the London Stock Exchange Group.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Global Sustainable Yield Index Series  Index or the fitness or suitability of the indexes for any particular purpose to which they might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group index data and the use of their data to create financial products require a licence from FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors.

Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets.

 

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