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Included below are the answers to most of the commonly asked questions on BMO ETFs. If you have an additional question or comment, please contact us at +44 (0) 207011 4444 or at client.service@bmogam.com



What are ETFs?

ETFs are open-ended funds that are listed and traded on a stock exchange, and can be bought or sold directly during trading hours, much like a stock. They typically represent a basket of securities which may consist of stocks, bonds, or other assets such as commodities. ETFs can offer many benefits to investors, including diversification, liquidity, cost effective, transparency and tax efficiency.


How does an ETF work?

ETFs are listed and traded on a stock exchange in the same way as an ordinary stock. Index ETFs closely tracks a specific market index and can be based on a variety of different indexes covering asset classes such as equities or bonds, whole regions or single countries and industry sectors. The aim of the ETF is not to out-perform the index but to track the index as closely as possible.


What are the similarities and differences between an ETF, a mutual fund and a stock?

ETFs combine some features of both mutual funds and stocks. An ETF is similar to a mutual fund as it is a collection of stocks or bonds and like a stock, an ETF can be bought and sold on an exchange throughout the day when the stock market is open.

Shares/units in mutual funds are bought directly from the fund and generally only priced once in a day based on the Net Asset Value (NAV). Shares in an ETF however, are generally created or redeemed by an Authorised Participant.

The liquidity of an ETF is not guaranteed, the NAV of an ETF may not be the same as the market price of the ETF, so investors may receive returns that are different to the NAV performance.


How does an ETF follow an Index over time?

ETFs position their underlying holdings to generally provide the return of the Index as closely as possible, less the ETFs expenses. Typically, an ETF will trade its holdings whenever the Index rebalances, such as quarterly, monthly, or daily, or whenever a corporate action occurs. Whenever the Index adds or subtracts holdings during periodical rebalances, the ETF will generally complete the same activity.


What is tracking error?

Tracking error is the performance difference between an ETF and its index.



How do I buy ETFs?

ETFs can be bought and sold on a stock exchange during normal trading hours through registered brokers. BMO ETFs are listed on the London Stock Exchange and cannot be purchased directly from BMO Global Asset Management.


How is the price of an ETF determined?

The trading price of an ETF is approximately equal to the value of the underlying holdings in the portfolio and any other asset or liabilities, such as cash and dividends receivable. The price of the ETF will move up and down during the trading day with supply and demand, but will generally reflect the price movements in the underlying holdings. Unlike a traditional mutual fund where an investor receives the end of day net asset value (NAV), an ETF investor can trade on the intra-day price (also known as an indicate NAV) on the exchange.


When placing a trade for an ETF, should I place a Market Order or Limit Order?

In general, it may be advisable to consider using limit orders when trading any security, including ETFs, especially with large amounts. This allows investors to control the price, at which they are willing to buy or sell.


What determines the Bid and Ask of an ETF?

The bid and ask for an ETF are similar to a stock, where the bid reflects what investors are willing to pay to buy units, and the ask reflects what investors are willing to sell units for. Unlike a stock, ETFs are open ended, meaning that supply and demand is not limited, so that a large order can result in the creation or redemption of ETF units. The bid and ask will reflect the average bid and ask of the underlying portfolio, and in addition, natural liquidity between buyers and sellers of the ETF may narrow the bid-ask spread.



How does BMO Global Asset Management’s entry into the ETF market impact its existing investment solutions business?

ETFs are designed to provide easy access to a variety of investment strategies and can be paired with our existing investment solutions to build an optimal portfolio that is right for each investor. By expanding our range of investment products to include ETFs, BMO Global Asset Management is giving investors additional choices so that they can make appropriate investment decisions tailored to meet their specific needs.


How can BMO ETFs fit into an investor's portfolio?

The range of physically-replicated BMO UCITS ETFs has been developed to meet investor demand for alternative solutions in low yield and high volatility environments as they seek more sophisticated solutions that provide better risk-adjusted returns. BMO has a proven track record of bringing new, innovative and client-focused concepts to the market and we have built on our experience managing ETFs in Canada and Hong Kong to develop this European ETF range.

The BMO equity ETFs form an ‘Income Leaders’ ETF range focused on generating high quality income for investors. Together with MSCI, BMO Global Asset Management has developed new equity indices, the methodology of which is to apply filters to select the companies with the highest quality scores and higher than average dividend yields. By identifying quality, the strategy aims to select the leading companies with long-term sustainable business models and clear competitive advantages. Screening for higher than average dividend yields means having the potential to provide investors with a sustainable income stream. Higher quality companies also tend to be less volatile than the broad market. BMO Global Asset Management’s ETFs track this methodology. The five equity ETFs invest in the UK, US and Europe ex-UK and come with hedged and unhedged portfolios.

The BMO Fixed Income ETFs are global corporate bond ETFs designed to help investors diversify their exposure to global investment grade corporate bonds and high yield bonds. These are the first ETFs to offer global investment grade corporate bond duration options of 1-3 years, 3-7 years and 7-10 years, allowing investors to position their bond portfolios precisely in anticipation of rising interest rates. The four fixed-income ETFs are based on a newly created subset of the Barclays Global Aggregate Index that selects the most liquid bonds in the Barclays universe and applies filters to exclude more illiquid bond issues. All fixed income ETFs are offered hedged to the Pound Sterling (GBP).

BMO Global Asset Management expects to add more currencies over time as it expands its footprint in Europe.


Who are BMO's Index Providers?

BMO has partnered with leading index providers to create innovative indices.

  • MSCI - For equities BMO has partnered with MSCI, a global leader of both traditional market capitalization and smart beta indices, to create the MSCI Select Quality Yield indices, designed to represent the performance of companies that have relatively higher dividend yield with high Quality scores within the Parent Index universe of securities. BMO has launched the Income Leaders ETF suite benchmarked to these newly created indices, introducing an innovative approach to income investing.
  • Barclays – In the fixed income space, BMO has partnered with Barclays, a global leader in fixed income indices who offer unmatched market coverage. Our suite of precise corporate ETFs are benchmarked the Very Liquid Index (VLI), a subset of the Barclays Global Aggregate Index. The VLI filter offer investors diversified, global, fixed interest exposure with the added flexibility of maturity banding.

Will BMO ETFs have any currency exposure?

Some of our ETFs are hedged at the share class level. On select ETFs investors can choose if they want exposure to the base currency or if they want a hedged option.


Are you developing more ETFs?

BMO Global Asset Management is committed to developing a significant presence in the European ETF market. Our goal is to deliver a comprehensive line-up of BMO ETFs that meet the current and future needs of ETF investors. To do this we will be evaluating our ETF line-up on a regular basis and making additions as we identify opportunities.



Bond investing via ETFs

Fixed income ETFs are poised to take a bigger role in institutional portfolios. As the same time that individual bonds have become harder to trade on the back of new regulation, liquidity in fixed income ETFs has risen dramatically, making them a logical option to help institutional investors efficiently implement strategic and tactical shifts within their portfolios.


What are the benefits of Fixed Income ETFs?

Fixed income ETFs can incorporate all of the benefits of a typical ETF - diversification, liquidity and cost effectiveness, offering investors a powerful and flexible tool to gain and manage their exposure to different segments of the global fixed income markets. Whether as a core portfolio component or within a “core-satellite” portfolio allocation, fixed income ETFs can offer investors additional benefits:

  • Broader and easier access to global fixed income markets
  • Often at lower costs than alternative types of index tracking vehicles
  • Portfolio holdings transparency
  • Exchange traded
  • Price discovery improvements
  • Intra-day order book two-way pricing supported by dedicated market makers


What are the tax considerations for BMO ETFs?

Potential investors in BMO ETFs should consult their own advisors as to the tax consequences of the purchase, ownership and redemption.

UK investors should note it is the intention that the ETFs will apply for reporting fund status (for certain Classes) from HM Revenue & Customs. The share classes that have reporting fund status will be included on the HMRC list of reporting funds available at this link. Investors should refer to their tax advisors in relation to the implications of the Funds obtaining such status.

Please refer to the prospectus for more details, or seek professional independent advice.


What is the frequency of distributions, and is there a schedule?

BMO ETFs pay distributions out of their income in cash. Generally, the greater the income in the fund, the higher the distribution frequency. For more on distribution details please visit the ETF fund page.


ETF Glossary

Exchange Traded Funds

If you have questions about specific terms or questions not answered here, please contact us at client.service@bmogam.com



Administrator — In relation to a BMO ETF, State Street Fund Services (Ireland) Limited, or such other company as many from time to time be appointed to provide administration and accounting services to the ETFs in accordance with the requirements of the central bank.

Annualised Rate of Return — An annualised rate of return is a cumulative return expressed as an equivalent annual compounded rate. A compounded rate of return includes the effect of interest-on-interest.

Asset Class — A type of investment such as stocks, bonds, real estate or cash.

Assets — The amount of money invested in a fund. Also referred to as Net Asset Value (NAV).

Authorised Participant — A company/entity chosen by the asset management company of the specific ETF (in this case BMO Global Asset Management) who is responsible for obtaining the underlying assets to create an ETF. Authorised Participants are typically large institutions, also known as market makers. For a list of Authorised Participants used by BMO please click here

Basket of Securities — In relation to a particular BMO ETF, a group of securities determined by the Manager from time to time representing the constituents of the applicable index in approximately the same weightings as such constituents are weighted in the applicable index.

Benchmark — A standard against which the performance of a stock, mutual fund or investment manager can be measured. Generally, broad market and market-segment stock and bond indexes are used for this purpose.

Corporate Bonds — A debt security issued by a company and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds.

Custodian — In relation to a BMO ETF, State Street Custodial Services (Ireland) Limited or such other company as may from time to time be appointed to provide custodian services to the Fund in accordance with the requirements of the Central Bank;

Date Started / Inception Date — The date that a fund became available for sale to investors.

Distribution Record Date — A date determined by the Manager as a record date for the determination of Unitholders of a BMO ETF entitled to receive a distribution.

Diversification — Spreading risk across various asset classes, geographical locations, sectors and duration. Diversification is important as it potentially enables investors to offset losses from one investment with gains realised from another investment which also reduces the risk that all of the stocks held in a particular portfolio will decline at the same time.

Duration — Measures the approximate sensitivity of a bond's price to a change in interest rates. A duration of 2, for example, means that the price of the bond would decrease/increase by approximately 2% if the interest rate increased/decreased by 1%.

ETF — Exchange traded fund.

Hedged Global Diversification — BMO Fixed Income ETFs aim to offer diversification globally, across country and issuers while removing the additional volatility of currency movements. By embedding a currency hedging strategy, investors are able to mitigate the effects of currency fluctuations. Returns are derived from pure corporate bond exposure.

Index — A measure of change in an economy or a securities market. In the case of financial markets, an index is a portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value.


Stock and bond market indexes are used to construct index mutual funds and ETFs whose portfolios mirror the components of the index.

Investment Manager — F & C Management Limited or such other entity as may from time to time be appointed to provide investment management services to the Fund in accordance with the requirements of the Central Bank of Ireland.

KIID — Key Investor Information Document.

Liquidity — The degree to which an asset can be bought or sold without affecting the price of that particular asset or in other words how quickly that asset can be converted to cash. Cash is the most liquid asset, while real estate and fine art for example are relatively illiquid. ETFs provide intraday liquidity through buying and selling during the trading hours of the stock exchange.

NAV (Net Asset Value) — The total assets of the ETF less the value of the total liabilities of the ETF, as at a specific date.

NAV per Share — The NAV per unit, calculated by dividing the NAV of the ETF by the total number of units outstanding. The NAV per share will be calculated at the valuation point on each business day.

On-going charge — The ongoing charge figure represents all the charges and payments taken from the assets of the ETF over a twelve month period. As our range of ETFs are newly launched, the figures we currently show an estimated on-going charge.

Primary Market — The market for a security that is being issued for the first time. Investors in the primary market buy directly from the issuer not from each other. Shares in ETFs are generally created or redeemed by authorised participants on the primary market.

Secondary Market — The market where investors purchase securities or assets from other investors rather than from the company issuing the security. National stock exchanges are secondary markets.

Transparency — The degree to which investors have easy access to the financial information related to a particular asset. Since their inception ETFs have been at the forefront of disclosing this data, such as the price, portfolio composition and tracking error along with many other pieces of data used to measure the effectiveness and performance of an ETF.

Tracking error — The purpose of an ETF generally is to track as closely as possible the return of a specific market index. Deviation from the index is known as a tracking error. Index funds which aim to match the performance of the respective index tend to have low tracking error. Some degree of tracking error is to be expected due to trading and management costs as well as fees.

UCITS — An undertaking for collective investment in transferable securities within the meaning of the UCITS regulations.

Unitholder — A holder of units of a BMO ETF.

Valuation Point — The time at which each ETF is valued.

Year to Date (YTD) Return — As at a specific date during a calendar year, the rate of return beginning January 1st of that calendar year to the specific date.


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