BMO Strategic Equity Yield Fund – Biweekly Update
October 11, 2024
Duy Le
CFA, Portfolio Manager, BMO Global Asset Management
Portfolio Manager Commentary
The BMO Strategic Equity Yield Fund (SEYF) has a NAV of $9.75 as of October 7, 2024 and the average coupon is between 10.50% to 11.00%1. The average protection within the Fund remains between 75.00% to 80.00%.
In September, eleven exposures (~$15mm CAD) were called and the called notional was reinvested into new exposures. In terms of regional allocation, the Fund is 76.84% invested into Canadian exposures, 19.3% invested in U.S. exposures, and 3.29% invested in European exposures. Canadian Banks (27.64%), Canadian broad-based indices (15.57%), and Canadian Insurance indices (14.67%) represent the three largest exposures within our Fund.
Recent economic data shows continued strength in the U.S. economy, which alleviated fears of a sharp deterioration in the labour market. The recent U.S. labour market print showed the fastest growth in the U.S. labour market in six-months, a drop in unemployment, and wage increases, decreasing the likelihood of a hard landing or recession. Both the U.S. and Canadian economies are expanding at a steady pace without a worsening in the labour market, which is positive for risk-on sentiment. The Portfolio Managers (PMs) of the Fund expect U.S. and Canadian equities to perform well in this macro environment. In terms of portfolio positioning, the PMs of the Fund have a slight bias towards the U.S. regionally and a bias towards quality and dividends in terms of factors.
Fund Snapshot
| Average Coupon | Average Buffer Level |
|---|---|
| 10.5-11.5% | 20-25% |
Distributions
| Previous | Upcoming |
|---|---|
| September 16, 2024 | October 16, 2024 |
Fund Characteristics
| Series | Fund Codes | MER (%)* |
|---|---|---|
| Advisor (CAD) | BMO99290 | 1.83 |
| F (CAD) | BMO95290 | 0.73 |
| **Low to Medium risk rating by prospectus. |
*As of September 30, 2023.
Volatility
Source: Bloomberg. Data illustrated for the period from October 7, 2023, to October 7, 2024.
Top 10 Trades
| Reference asset | Annualized Coupon | % of overall fund | Distance to Protection | Distance to Call (Positive is in the money) |
|---|---|---|---|---|
| Canadian Banks | 13.91% | 3.31% | 43.98% | 18.98% |
| Canadian Banks | 12.04% | 1.66% | 26.59% | 6.59% |
| US Banks | 10.14% | 1.66% | 20.23% | -4.77% |
| Canadian Banks | 11.55% | 1.66% | 26.59% | 1.59% |
| US Market | 8.52% | 1.66% | 50.71% | 30.71% |
| Canadian Market | 13.38% | 1.66% | 46.29% | 26.29% |
| Canadian | 10.62% | 1.52% | 12.42% | -7.58% |
| Telecommunications | 10.62% | 1.42% | 9.55% | -10.45% |
| Canadian Insurance | 11.00% | 1.33% | 23.74% | 3.74% |
| US Market | 9.35% | 1.33% | 21.12% | 1.12% |
| US Market | 9.00% | 1.33% | 20.60% | 0.60% |
Source: BMO GAM October 7, 2024.
Reference Asset Exposure and Regional Exposure1
1Reference Asset and Regional Exposure refer to the underlying benchmark exposure from the Total Return Swaps held by the Fund. Source BMO GAM October 7, 2024. Holdings are subject to change without notice.
Disclaimer
The BMO Strategic Equity Yield Fund will focus on replicating exposure to notes focused on income generation, while also maintaining contingent downside protection. Our dedicated team of structured product professionals seeks to achieve above market returns and exposure to North American and/or global equity markets through the use of derivatives and/or structured products.
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BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.
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BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.
Commissions, trailing commissions (if applicable), management fees and expenses all may be associated with mutual fund investments. Please read the ETF facts, fund facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
For a summary of the risks of an investment in the BMO Mutual Funds, please see the specific risks set out in the prospectus. ETF Series of the BMO Mutual Funds trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.
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