BMO Asset Management has launched five new ETFs in Canada, including the country’s first ETF to offer access to Nobel Prize-winning economist Robert Shiller’s cyclically adjusted price-earnings (CAPE) methodology.
Professor Robert Shiller. (file image)
The CAPE ratio is calculated by dividing the current market value of a security’s shares by its average, inflation-adjusted earnings over ten years. By comparing this figure to historical averages of other securities, the ratio provides insight into how the companies are relatively valued.
The BMO Shiller Select US Index ETF (Toronto: ZEUS) provides an equal-weight strategy that combines value and momentum, leveraging the research of Professor Shiller.
The fund tracks the Shiller Barclays CAPE US Single Stock Index. The index is constructed by selecting the top 100 US large-cap equities with the lowest CAPE ratios, and a momentum filter is applied to remove 20 securities with the lower price momentum over the last 12 months. Each security is equally weighted, and the index is rebalanced on a quarterly basis.
“The Shiller Barclays CAPE US Single Stock Index tracks seasoned companies – what I call ‘Old Standbys’ – that also show good value by the CAPE ratio,” said Robert Shiller, professor of economics and finance at Yale University. “It is a different approach to value investing and was designed to identify stocks that are well established and relatively forgotten, with a long history of earnings but underpriced in the market.”
“We’re thrilled to draw upon Professor Shiller’s renowned scientific and academic research to offer this unique ETF,” added Kevin Gopaul, head of quantitative strategies & ETFs, BMO Global Asset Management. “As a leading provider of ETFs, we are committed to offering solutions that go beyond traditional exposures while staying relevant in today’s market.”
ZEUS has a management expense ratio of 0.73%.
Other ETFs coinciding with the Shiller strategy launch include:
The BMO MSCI Canada Value Index ETF (ZVC), BMO MSCI EAFE Value Index ETF (ZVI), and BMO MSCI USA Value Index ETF (ZVU) offer factor-based access to Canadian, international, and US companies respectively, with higher value characteristics relative to their peers.
The BMO High Yield US Corporate Bond Index ETF (ZJK) offers investors access to unhedged US high yield corporate bonds. BMO also offers an existing hedged version, BMO High Yield US Corporate Bond Hedged to CAD Index ETF (ZHY).
BMO now has 95 ETFs in Canada, accounting for a 31.6% share of the Canadian ETF market, according to Bloomberg data.