Fund Profile: BMO Allocation ETFs

Consider these low-cost balanced funds that benefit from a strong management team.

Michael Dobson 20 October, 2023 | 4:56AM
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BMO

They might not hold the same level of assets as their mutual fund cousins, but the BMO Allocation ETFs holds many of the same strengths as the BMO ETF Portfolios. The four risk options represent the firm’s venture into the static allocation space and take advantage of BMO’s advantage in low-cost index-tracking strategies. The resulting portfolios efficiently provide broad coverage of both stocks and bonds. At 20 basis points (0.20%), they are nearly the cheapest of their kind.

Core positions in in-house ETFs anchor the Allocation ETFs. Gold-rated BMO S&P 500 ETF ZSP, Silver-rated BMO S&P/TSX Capped Composite ETF ZCN, and Bronze-rated BMO Aggregate Bond ETF ZAG all charge less than 10 basis points. The strong BMO ETF portfolio management team headed by Rob Bechard behind the core holdings also manages rebalancing and cashflows.

Improvements Bring them up to Par

Efforts to improve their efficacy since the February 2019 inception show the malleability of these portfolios. In March 2021, the funds expanded their coverage of US equity through BMO S&P US Mid Cap ETF ZMID and BMO S&P US Small Cap ZSML to better capture stocks beyond the S&P 500. A consolidation in February 2023 saw the removal of Canadian government bonds and mid-term corporate bonds into one ETF – BMO US Aggregate Bond ETF Hedged ZUAG.F. This increased geographic diversity within the fixed income sleeve, though the funds still hold nearly 70% of their bonds in Canada, higher than the average global balanced fund at 54%.

The BMO Allocation ETFs should continue to benefit from the ETF portfolio management team. While smaller than other funds at the firm, these strategies align well with BMO’s strengths.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BMO Aggregate Bond ETF13.74 CAD0.07Rating
BMO S&P 500 ETF (CAD)82.28 CAD0.73Rating
BMO S&P US Small Cap ETF38.43 CAD0.65Rating
BMO S&P/TSX Capped Composite ETF29.08 CAD-0.03Rating
BMO US Aggregate Bond ETF30.51 CAD1.70

About Author

Michael Dobson  Michael Dobson is an Associate Manager Research Analyst at Morningstar Canada

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