Wed, 08/08/2018 - 21:06
Purpose Investments has converted the Purpose Floating Rate Income Fund from a closed-end fund to an exchange-traded mutual fund.
As part of the conversion, the Fund’s Class A units and Class U units have been renamed ‘ETF units’ and ‘ETF non-currency hedged USD units’, respectively, and the trading symbol for the Class A units has changed from FLOT.UN to simply FLOT. A new class of units designated as ETF non-currency hedged CAD units have also commenced trading on the Toronto Stock Exchange under the symbol FLOT.B, and other classes of mutual fund units have become available for purchase under the Fund’s prospectus.
The conversion should provide holders of FLOT.UN and FLOT.U with several benefits, including a lower management fee and a lower expected management expense ratio – Effective 15 June 2018, Purpose reduced the management fee on FLOT.UN and FLOT.U to 0.85 per cent per annum from 1.25 per cent.
As an exchange-traded fund is in continuous distribution, FLOT’s and FLOT.U’s ETF units are expected to trade efficiently and close to its Net Asset Value at all times and the units will be redeemable daily at NAV, thereby significantly increasing the liquidity for unitholders.
On 17 April 2018, asset manager Neuberger Berman Investment Advisors LLC (NB) assumed management of the Purpose Floating Rate Income Fund portfolio. NB is a private, independent, employee-owned investment manager with over USD299 billion in assets under management, as at 31 March 2018, including USD130 billion managed across the fixed-income universe. The Fund will benefit from NB’s breadth and depth of experience, resources and innovative investment solutions, which can be leveraged extensively in the ETF/mutual fund format.
The conversion will not result in a disposition of units by holders of FLOT.UN and FLOT.U, and accordingly, any embedded gain will not be realised as a result of the conversion. This differs from the treatment that would occur on a redemption or termination of a fund, which would result in a disposition of the shares and the realisation of any income for tax purposes.
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