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A bond ETF you probably never heard of is getting a bit cheaper.

The management fee for the Desjardin Canadian Universe Bond Index ETF (DCU-T) falls to 0.07 per cent from 0.10 per cent, effective Nov. 1.

Bonds? No one likes them right now because interest rates are rising. A fee cut of 0.03 of a percentage point? Yawn, right?

Here’s why this fee cut from Desjardins Global Asset Management is more significant than it seems. Bond exchange-traded funds are now getting nearly as cheap as equity funds, a big help in this low-yield world we live in. Every incremental decline in bond ETF fees puts a bit more money in the pocket of investors, while also seeding the ground for further fee cuts to come.

Desjardins is one of the smaller players in a crowded Canadian ETF market – DCU has assets of about $18-million, compared with $6-billion for the BMO Aggregate Bond Index ETF (ZAG-T) and $4.6-billion for the iShares Core Canadian Universe Bond Index ETF (XBB-T). Why consider DCU at all?

The low fee is as good a reason as any. ZAG’s management fee is 0.08 per cent, while XBB’s is 0.09 per cent. The all-in fee to own bond ETFs like these, as measured by the management expense ratio, is generally 0.01 of a point above the management fee. So figure on DCU having an MER of 0.08 or 0.09 per cent, compared with 0.09 per cent for ZAG and 0.10 per cent for XBB.

All three of these ETFs perform the same job in portfolios in providing access to the broad bond market, including federal and provincial government bonds plus corporate debt as well. ZAG and XBB appear to have a higher corporate weighting, which is appealing right now because corporate bonds are a bit more resistant to rising rates.

DCU’s main drawback is that it doesn’t trade nearly as much as ZAG and XBB, which in turn means more of a gap between the minimum price that sellers are willing to accept and the maximum amount buyers will pay. One day this week, the bid-ask spread for DCU was 3 cents, while ZAG and XBB had a tight spread of 1 cent.

It’s totally understandable if investors stick with the tried and true in broad-market bond ETFs. But let’s hope Desjardins brings in some new money. Continuing fee competition is one of the quiet benefits of ETF investing and it needs to be encouraged as much as possible.

-- Rob Carrick, personal finance columnist

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Ask Globe Investor

Question: I was wondering if it would be possible for you to comment on Canadian General Investments Ltd. This company appears to trade at a discount to its net asset value. Can you please explain why? Is this a potential value trap? Also, this company has a history of consistently increasing its dividends.

Answer: This is a closed-end fund that trades on the TSX under the symbol CGI-T. To my knowledge, it’s the oldest fund of its kind in Canada, having been launched in 1930. Since 1956, it has been managed by Morgan Meighen & Associates.

Closed-end funds have a limited number of shares. There is no new supply unless the company implements a secondary issue, which is rare.

You would think that, logically, units of closed-end funds would be worth more because of the limited supply. But that’s not the case. Many closed-end funds trade at a discount (sometimes a deep one) to their underlying net asset value. For example, CGI closed on Oct. 22 at $39.26. The NAV on that day was $62.47. That’s a discount of more than $23!

This fund has historically traded at a discount to net asset value, but this is close to the extreme end of the range. What’s behind it?

It’s not the portfolio. The top 10 holdings are solid, growing companies like Shopify Inc., Nvidia Corp., Lightspeed Commerce Inc., Canadian Pacific Railway Ltd., TFI International Inc., Descartes Systems Group Inc. and Amazon.com Inc.

But income investors won’t be excited by the quarterly dividend of 22 cents a share (88 cents a year). That translates into a yield of 2.2 per cent. However, as our reader points out, the fund does have a history of raising its payout annually, usually by a penny a quarter.

The law of supply and demand plays a role in the pricing as well. Average trading volume for CGI is only 3,784 units a day. If more people are looking to sell than to buy, it drives down the trading price.

Some investors track the discount ranges of closed-end funds, buying when they are at their peak and selling when they approach their lows. But finding the information can sometimes be difficult. Many of these funds are not known for their transparency.

CGI shows a 10-year average annual compound rate of return of 14.25 per cent on its share price. That makes it worth considering, especially if buying stocks at a deep discount appeals to you. But be warned: the units are trading at close to their highest price in 25 years. If the market hits a correction, they’re going to drop in value.

--Gordon Pape

What’s up in the days ahead

With companies poised to funnel more cash towards shareholders in Canada, should investors focus on stocks doing buybacks to generate stronger returns? Robert Tattersall will have some answers.

It’s now or never: World market themes for the week ahead

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Globe Investor Staff