BMO to alter 5 ETFs

BMO Asset Management recently proposed changes to the objectives of five of its ETFs.

Read: BMO proposes changes to two ETFs

ETFInsight says the potential alterations are positive for your clients, providing more diversification and aligning with their preferences. The following modifications were proposed:

The BMO Dow Jones Canada Titans 60 Index ETF (ZCN): Rather than tracking the Dow Jones Titans 60 Index, the ZCN will track the S&P/TSX Capped Composite Index.

ETFInsight says, “The Composite Index provides greater breadth of coverage—248 stocks relative to 60—of the Canadian Market. The current cost structure of ZCN will remain, but the fund will be competitively priced compared to existing alternatives on the S&P/TSX Capped Composite Index.

BMO U.S. Equity Hedged to CAD Index ETF (ZUE): Going forward, subject to approval, ZUE will track the S&P500 CAD Hedged.

ETFInsight says, “The move will broaden the reach of the underlying exposure provided, while also pairing the fund up with a more recognizable index. The S&P500 offers exposure to 500 Large Cap stocks, compared to the current 280 names comprising ZUE.”

BMO Global Infrastructure Index ETF (ZGI) – BMO is looking to narrow down the list of securities included in this fund, to only North American listed stocks. If approved, it will follow the Dow Jones Brookfield Global Infrastructure North American Listed Index.

ETFInsight says, “By aligning the fund’s mandate with its underlying index, the costs associated with creation and redemption will be enhanced. This is more housekeeping than wholesale change, but still a positive.

Read: Infrastructure helps weather downturns

BMO China Equity Hedged to CAD (ZCH), and BMO India Equity Hedged to CAD (ZID) – If approved, these funds will follow the BNY Mellon China Select ADR Index and BNY Mellon India Select ADR Index, respectively. Their names will change to BMO China Equity Index ETF and BMO India Equity Index ETF.

ETFInsight says, “The CAD FX Hedging presently embedded within these two ETFs will be removed. This, according to BMO ETFs, recognizes the fact that end users seem to favour a non-hedged product. Consequently, we won’t mind seeing the costs associated with FX hedging left out of the equation—even if they will have to bear the risks associated with fluctuations in the Chinese Renminbi and the Indian Rupee.”

Read: Currency hedging on the rise (2006)

It adds, “The changes are only a positive if the currency risk doesn’t bother investors. If they wish to remain FX hedged, though, they’d have to express this in no uncertain terms. Clients are often more inclined to view EM currencies as overtime poised to gain in value, as opposed to exposing their portfolios to significant downside risk. We expect the removal of the FX hedges will be approved.”

Read: Currency volatility and your clients

These changes will be officially put forward at a special meeting on September 13th, 2012.