Fund Management

BMO Global AM Seeks To Enhance Returns With New ETFs

Robbie Lawther, Reporter, London, 17 July 2017

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The firm claim it is the new ETFs are the “UK’s first suite of enhanced income ETFs based on a covered calls strategy”.

BMO Global Asset Management, part of BMO Financial Group, has launched a suite of enhanced income exchange traded funds (ETFs) in the UK, based on a covered calls strategy.

The ETFs are designed to provide equity exposure with a sustainable, high-yield derived from dividends and employ a covered call option overlay, the firm said in a statement. (The strategy means selling the right to buy stocks via the options market as a way of generating additional income.)

The firm also said that it was the “UK’s first suite of enhanced income ETFs based on a covered calls strategy”.

The new products will cover the UK, Europe and the US markets. BMO Enhanced Income UK Equity UCITS ETF (ZWUK LN), BMO Enhanced Income Euro Equity UCITS ETF (ZWEU LN) and BMO Enhanced Income USA Equity UCITS ETF have all been launched by BMO Global AM.

The ETFs can be seen as examples of the kind of investment products being rolled out at a time when it might be thought that stock markets will struggle to make much further headway if, or when, interest rates "normalise", generating the need for new sources of return and protection of investors' wealth and sources of income.

The enhanced income ETFs will aim to achieve index-like returns over the long term, as it offers reduced volatility and higher yield. The ETFs target a yield enhancement of 3 per cent over the chosen equity benchmark, which is an expected total gross yield of around 5 per cent for the BMO Enhanced Income USA UCITS ETF; and approximately 7 per cent for the BMO Enhanced Income UK UCITS ETF and BMO Enhanced Income European UCITS ETF.

“Investors’ search for yield is as strong as ever, as is their focus on ensuring their portfolios are protected on the downside, minimising volatility risk,” said Rob Thorpe, head of UK intermediary. “With this new suite of ETFs we are able to directly address many concerns that professional investors have, which is how they can precisely manage their portfolios to a desired level of income, while still maintaining the potential for capital gains. We expect they will find our new range of high yielding ETFs a very useful tool.”

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