BMO expands in fixed-income and covered-call ETFs

Rudy Luukko 7 March, 2018 | 6:00PM

BMO Asset Management Inc. today launched five new exchange-traded funds on the Toronto Stock Exchange, consisting of three bond-index funds and two actively managed equity funds that employ covered-call writing.

BMO Government Bond Index (symbol: ZGB) will invest in Canadian federal, provincial and municipal bonds across all sectors and maturities. BMO Corporate Bond Index (ZCB) will hold Canadian investment-grade corporate bonds, diversified by sectors and maturities. BMO Short-Term Bond Index (ZSB) will provide exposure to Canadian investment-grade bonds with maturities of one to five years.

Each bond ETF has a Bloomberg Barclays index as its benchmark, and will make quarterly distributions. Management fees, which include most expenses, are 0.15% for the government and corporate ETFs, and 0.09% for the short-term ETF.

As for the equity strategies, BMO US High Dividend Covered Call Hedged to CAD (ZWS) is a currency-hedged version of an existing ETF, while, BMO Europe High Dividend Covered Call (ZWP) does not hedge foreign-currency exposure but otherwise employs the same strategy as an existing ETF.

Investing in dividend-paying stocks, the equity ETFs are actively managed, employing rules-based criteria that consider dividend growth, yields and payout ratios. Covered-call writing, while lessening the ETFs' potential for capital gains, is designed to reduce risk and generate income that will be distributed monthly.

The management fees for each of the new equity ETFs is 0.65%.

ETF name Symbol Mgmt. fee (%)
BMO US High Dividend Covered Call Hedged to CAD ZWS 0.65
BMO Europe High Dividend Covered Call ZWP 0.65
BMO Government Bond Index ZGB 0.15
BMO Corporate Bond Index ZCB 0.15
BMO Short-Term Bond Index ZSB 0.09
Source: BMO Asset Management Inc.

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Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.