BMO Global Asset Management, the fund management division of the Canadian-headquartered bank, has become the latest company to enter the fast growing European ETF space with the launch of a suite of funds offering exposure to corporate bonds and quality income equities.
BMO’s new European ETF range offers core fixed income and equity exposure across a variety of regions.
The range includes four global corporate bond ETFs to help investors diversify their exposure to global investment grade corporate bonds and high yield bonds, and five smart beta equity ETFs focused on generating high quality income for investors.
The fixed income funds are currency-hedged to mitigate the effect that currency fluctuations between sterling and international currencies can have on returns. Similarly the equity funds investing outside the UK are available in sterling-hedged versions.
“Establishing our ETF offering in Europe is a key strategic milestone for us as we continue to expand across the region,” said Richard Wilson, CEO, BMO Global Asset Management (EMEA). “We are very proud of our track record of developing relevant, innovative and client-focused products. Since the launch of the BMO Global Asset Management brand in Europe earlier this year, we have successfully brought our investment expertise to help new clients in new markets.”
The three global corporate bond ETFs offer fixed income exposure across a range of maturity bands. “Our bond ETFs provide investors with the ability to diversify their exposure through global corporate bonds and high yield bonds,” said Kevin Gopaul, Head of ETFs, BMO Global Asset Management. “These are the first ETFs to offer a range of specific global corporate bond maturity bands, allowing investors to position their portfolios more precisely on the yield curve.”
These building blocks are designed to give investors the ability to implement a more precise positioning in an uncertain interest rate environment, allowing investors to tailor their exposure more flexibly across the yield curve and express their own views on interest rates.
The funds track the Barclays Very Liquid Index range which is a subset of the Barclays Global Aggregate Bond Index. By applying filters to exclude more illiquid bond issues these indices address a key concern for many investors with regards to the liquidity of the underlying holdings of their funds.
The five equity ETFs in the BMO ‘Income Leaders’ range aim to provide investors with exposure to quality continental European, UK and US companies which should generate a sustainable income stream. By identifying quality, the strategy looks to select the leading companies with long-term sustainable business models and clear competitive advantages.
“We align ourselves with investor needs in our equity products by focussing on yield, quality and volatility,” noted Mr. Gopaul. “Low yields and uncertainty around interest rates are causing investors to review their portfolios. In this challenging environment, investors can look to ETFs to deliver yield and help in the implementation of more precise portfolio construction.”
The equity range of funds tracks the MSCI Select Quality Yield Indices which are designed to represent the performance of companies that have a relatively higher dividend yield and quality score. The constituents of these indices are selected by first screening the eligible universe on measures of fundamental quality (i.e. return on equity, earnings variability and debt to equity) with the top 50% included. The second step then selects the top 50% of these securities by dividend yield. The indices are free float market capitalisation-weighted with issuer level weights capped at 5%.
The funds have been listed on the London Stock Exchange and carry ongoing charges ranging from 0.30% to 0.40% per annum.
BMO MSCI USA Income Leaders UCITS ETF (ZILS LN)
BMO MSCI Europe ex-UK Income Leaders UCITS ETF (ZILE LN)
BMO MSCI UK Income Leaders UCITS ETF (ZILK LN)
BMO MSCI USA Income Leaders (GBP Hedged) UCITS ETF (ZISG LN)
BMO MSCI Europe ex-UK Income Leaders (GBP Hedged) (ZIEG LN)
BMO Barclays 1-3 Year Global Corporate Bond (GBP Hedged) UCITS ETF (ZC1G LN)
BMO Barclays 3-7 Year Global Corporate Bond (GBP Hedged) UCITS ETF (ZC3G LN)
BMO Barclays 7-10 Year Global Corporate Bond (GBP Hedged) UCITS ETF (ZC7G LN)
BMO Barclays Global High Yield Bond (GBP Hedged) UCITS ETF (ZHYG LN)