BMO cuts fees on LSE-listed corporate bond and equity income ETFs

Sep 3rd, 2018 | By | Category: Alternatives / Multi-Asset

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BMO Global Asset Management has reduced the fees on a number of its London Stock Exchange listed corporate bond and equity income ETFs.

Kevin Gopaul, head of BMO Global Asset Management Canada.

Kevin Gopaul, Head of Quantitative Strategies & ETFs at BMO Global Asset Management.

The fee reductions, effective from 1 September 2018, come after global ETF assets under management at the firm hit C$50 billion.

Kevin Gopaul, Head of Quantitative Strategies & ETFs at BMO Global Asset Management, commented, “From a market leading position in Canada, we extended our range of innovative solution-focused ETFs to the UK with the launch of our global corporate bond ETFs and our Income Leader ETFs in November 2015.

“As our ETF business has continued to grow globally, we have been able to build economies of scale, which means we are now in a position to pass even further cost savings onto our clients.”

Rob Thorpe, Managing Director, Head of Distribution, Intermediary, UK at BMO Global Asset Management, added, “We are always listening to clients and are acutely aware that cost is a real focus for many. As such, through offering our innovative ETFs at this reduced rate, we are able to offer even better value for money in the ETF space.”

Income Leaders

The total expense ratios (TER) of the affected funds within its ‘Income Leaders’ suite have been reduced from between 35 – 40 basis points to 25 – 30 basis points.

Developed in collaboration with MSCI, the ETFs seek to provide investors with sustainable income from high calibre companies. The underlying indices use a multi-factor approach, first screening stocks for quality before selecting those with the highest dividend yields. By identifying quality firms, the strategy aims to select companies with long-term sustainable business models and clear competitive advantages.

The ETFs also address the shortcomings of strategies based on dividend yield alone, which overlook the ability of the underlying companies to continue paying dividends. By assessing company profitability and leverage to identify those with the ability to generate strong future cash flows, investors are more likely to avoid falling into a value trap.

The fee reductions have been applied to the US, UK, and Europe ex-UK ETFs, as well as to select currency-hedged variations of these funds.

BMO MSCI UK Income Leaders UCITS ETF (ZILK LN); reduced from 35bps to 25bps.
BMO MSCI Europe ex UK Income Leaders UCITS ETF (ZILE LN / ZIEU LN); reduced from 35bps to 25bps.
BMO MSCI Europe ex UK Income Leaders (£ Hedged) UCITS ETF (ZIEG LN); reduced from 40bps to 30bps.
BMO MSCI USA Income Leaders UCITS ETF (ZILS LN / ZIUS LN); reduced from 35bps to 25bps.
BMO MSCI USA Income Leaders (£ Hedged) UCITS ETF (ZISG LN); reduced from 40bps to 30bps.

The firm also offers an Income Leaders ETF targeting emerging market equities – the BMO MSCI Emerging Markets Income Leaders UCITS ETF (ZIEM LN) but its TER remains unchanged at 0.38%.

Global corporate bonds

The TERs of the its global corporate bond ETFs have been reduced from 30 basis points to 17 basis points. The funds provide exposure to Bloomberg Barclays indices that track investment grade corporate bonds issued by companies globally.

To be eligible for inclusion in the indices, bonds must be denominated in US dollars and have a minimum issue size of $750m. A maximum of three bonds per issuer is allowed in each index. The indices are weighted by market value outstanding and rebalanced on a monthly basis.

The range comprises ETFs tracking specific segments of bond maturities (one to three years, three to seven years, and seven to ten years) and enable investors to target precise portfolio duration levels. Each ETF hedges currency exposure between the US dollar and the funds’ base currency, pound sterling.

The funds are:

BMO Barclays 1-3 Year Global Corp Bond ETF (ZC1G LN)
BMO Barclays 3-7 Year Global Corp Bond ETF (ZC3G LN)
BMO Barclays 7-10 Year Global Corp Bond ETF (ZC7G LN)

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