Product roundup: BMO launches gold ETF with a covered call spread strategy — and more

“And what we’re doing here is offering basically tools for different types of scenarios.”

The new ETFs include:

• BMO Covered Call Spread Gold Bullion ETF (TSX: ZWGD), which has a 0.65% management fee and “medium” risk rating. The fund provides exposure to gold by investing in the BMO Gold Bullion ETF (TSX: ZGLD). It also employs a covered call spread strategy, aiming to produce monthly cash flow from a traditionally non-yielding asset.
• BMO Canadian Core Plus US Balanced ETF (TSX: ZBCB), which has a 0.4% management fee and “low to medium” risk rating. The fund aims to provide income and long-term capital appreciation by investing in Canadian and U.S. equities and fixed-income instruments.
• BMO Canadian Equity Plus ETF (TSX: ZBEC), which has a 0.45% management fee and “medium” risk rating. The fund aims to provide long-term capital appreciation by investing in Canadian equities, and to a lesser extent, U.S. equities. It has a target portfolio allocation of 70% Canadian equities and 30% U.S. equities, but this may change from time to time.
• BMO US Dividend Growth ETF (TSX: ZBDU/ZBDU.F), which has a 0.45% management fee and “medium” risk rating. The fund aims to provide income and long-term capital appreciation primarily by investing in U.S. large-cap equities with a focus on consistent dividends, yield and growth.
• BMO US Large Cap Disciplined Value ETF (TSX: ZBVU), which has a 0.45% management fee and “medium” risk rating. The fund aims to provide long-term capital appreciation by investing in U.S. large-cap equities that exhibit value characteristics.
• BMO US Equity Focused ETF (TSX: ZBEU/ZBEU.F), which has a 0.45% management fee and “medium” risk rating. The fund aims to provide long-term capital appreciation by investing in core U.S. large-cap equities.

Speaking about ZWGD, Rai said the firm wanted to launch a gold bullion ETF that still offered the benefits of investing in gold — such as low correlation with stocks and bonds and an ability to act as a hedge against inflation and economic uncertainty — while adding an income stream to a traditionally non-yielding asset.

The fund’s covered call spread strategy involves selling an out-of-the-money call on its underlying ETF (ZGLD) and buying an even deeper out-of-the-money call to achieve this goal, he explained.

“So, this is a new product that we have that tracks the underlying price of gold for the most part. It also augments that with an attractive yield,” Rai said.

The five other funds are based on market insights from Brian Belski, chief investment strategist and leader of the Investment Strategy Group at BMO Capital Markets.

Belski is a sub-advisor for eight separately managed account (SMA) offerings at BMO, which are available to BMO advisors and clients. He said the new ETFs — ZBCB, ZBEC, ZBDU/ZBDU.F, ZBVU and ZBEU/ZBEU.F — are based on the five largest SMAs he oversees, but they’re offered to all investors in Canada.

“I guess [BMO] Asset Management looked at what we’re doing and said, ‘Let’s share the love. Let’s share the love with everybody in Canada, not just BMO,’” Belski said in an interview.

Belski said he continues to believe that the U.S. stock market is in the midst of a 25-year secular bull market and that Canada will come along for the ride. The new funds invest in strategies that align with this market outlook.

“We’re really directing clients to stay right here at home, so they can reach out, touch and see the companies that they own here in Canada, in the United States,” Belski said.

“I believe that North America remains the most consistent, pristine equity environment for the next 10 years, period.”

BMO announces several mutual fund launches, changes

Separately, BMO Financial Group announced the launch of new mutual funds and several changes to its current product offerings.

First, it said it would launch the following mutual funds:

• BMO Covered Call Spread Gold Bullion ETF Fund, which will be offered in F, I and advisor series
• BMO Covered Call Technology ETF Fund, which will be offered in F, I and advisor series
• BMO Gold Bullion ETF Fund, which will be offered in A, F, G, I and advisor series
• BMO Long Short U.S. Equity ETF Fund, which will be offered in F, I and advisor series
• BMO Target Education 2045 Portfolio, which will be offered in A and F series

It also made several risk rating and fee changes for certain product offerings.

More information is available here and here.

RBC iShares offers new funds with differing strategies

RBC iShares has expanded its ETF lineup with three new funds that have differing strategies.

The new ETFs include:

• iShares Core S&P Total U.S. Stock Market Index ETF (TSX: XTOT, XTOT.U), which has a 0.07% management fee that’s subject to change, a release said. The fund will provide investors with exposure to large-, mid-, small-, and micro-capitalized companies in the U.S. equity market.
• iShares Core Canadian Short-Mid Term Universe Bond Index ETF (TSX: XSMB), which has a 0.15% management fee. The fund will provide investors with exposure to Canadian-domiciled bonds with maturities between a year and 10 years. This may include federal, provincial, corporate and municipal bonds.
• RBC iShares launched the RBC AAA CLO ETF (Cboe: RCLO), which has a 0.29% management fee. The fund invests primarily in a diversified portfolio of AAA-rated CLO debt tranches from issuers primarily in the U.S. It can also invest in CLO debt tranches from issuers in Europe, a release said. The fund’s also hedged to the Canadian dollar to minimize currency risk.

Scotiabank announces fund changes

Scotiabank’s asset management arm has reduced the management fees for four of its investments products and tweaked the risk ratings for three others.

The changes take effect immediately.

A full breakdown of the changes is available here.