Don’t Sacrifice Cashflow for Growth. Get the Potential for Both with the BMO Global Enhanced Income Fund.
May 2024
Snapshot
The BMO Global Enhanced Income Fund serves as a comprehensive and strategic investment solution designed for discerning investors seeking a sophisticated and cost-effective approach to sustainable cashflow and growth. This Fund aims to streamline the complexities of investing, providing investors with a seamless experience across various strategic pathways.
Benefits
- Convenience: The Fund serves as a one-stop shop, offering clients global exposure through strategic investments across BMO GAM's suite of covered call solutions.
- Diversified Portfolio: This Fund strategically invests across diverse regions and sectors, improving the adjusted risk-return profile and overall client experience. The Fund is tactically managed to capitalize on market opportunities and navigate potential discrepancies.
- Low Cost: The Fund adopts a straightforward fee structure, charging a single management fee of 0.55% (as of April 30, 2024). This simplicity ensures investors can easily understand and assess their investment costs.
The Fund currently has a healthy yield vs the broad index.1
Source: Bloomberg, as of April 23, 2024. Index returns do not reflect transactions costs or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is not indicative of future results.
Sector Weightings
From a sector point of view, the Fund is still overweight Financials (mainly through Canadian exposures) as well as Energy, through exposure to the BMO Covered Call Energy ETF (Ticker: ZWEN).
Energy
- The BMO Global Enhanced Income Fund maintains an overweight position in the Energy sector through its ZWEN exposure. This approach, incorporating covered calls, aims to capitalize on higher call option premiums while mitigating some downside risks, particularly amid increased market volatility.
- On the oil front, the supply side remains constrained while demand has been resilient. On the supply side, OPEC+ remains steadfast in its commitment to restrict production, maintaining a collective reduction of ~2.2million barrels per day. Furthermore, the escalating tensions in the Middle East could further disrupt supply side dynamics. On the demand side, despite apprehensions regarding economic slowdown, global demand for oil has demonstrated ongoing resilience.
Canadian Banks
- The Fund’s overweight position in Financials persists, primarily through Canadian banks via the BMO Covered Call Canadian Banks ETF (Ticker: ZWB). It is a sector we view constructively with several factors contributing to our positive outlook, including:
- Attractive value proposition with a yield of 4.74%, compared to a 4% long-term average.2
- Favourable fundamentals, with banks trading below their long-term average on both forward price-to-earnings (P/E) and price-to-book (P/B).
- Despite potential economic headwinds, Canadian banks' proactive measures, which include strong provisions for credit losses, give us confidence in their ability to manage specific challenges. The banks' record of preparedness, as evidenced in past earnings cycles, underscores their view that credit losses remain manageable at this point in the cycle.
- In summary, our constructive stance on banks aligns with our commitment to a well-rounded, diversified, and strategically managed investment approach within the BMO Global Enhanced Income Fund.
Below is the current positioning for the BMO Global Enhanced Income Fund (Weights + Sectors):
Bloomberg: As of April, 23, 2024.
| Holding | % of the Portfolio | Yield % |
|---|---|---|
| BMO Global High Dividend Covered Call ETF (ZWG) | 25.00% | 7.0% |
| BMO US High Dividend Covered Call ETF (ZWH) | 23.75% | 5.2% |
| BMO Canadian High Dividend Covered Call ETF (ZWC) | 13.00% | 7.0% |
| BMO Europe High Dividend Covered Call Hedged to CAD ETF (ZWE) | 11.00% | 7.0% |
| BMO US High Dividend Covered Call ETF (Hedged) (ZWS) | 9.50% | 5.4% |
| BMO Covered Call Technology ETF (ZWT) | 10.25% | 4.3% |
| BMO Covered Call Canadian Banks ETF (ZWB) | 5.00% | 7.4% |
| BMO Covered Call Energy ETF (ZWEN) | 2.50% | 8.0% |
As of April 23, 2024.3 The portfolio holdings are subject to change without notice and only represent a small percentage of portfolio holdings. They are not recommendations to buy or sell any particular security. Annualized Distribution Yield: This yield is calculated by taking the most recent regular distribution, or expected distribution, (excluding additional year end distributions) annualized for frequency, divided by current NAV. The yield calculation does not include reinvested distributions.
BMO GAM Approach
In selecting BMO Global Asset Management (BMO GAM) and the BMO Global Enhanced Income Fund amid a competitive landscape, investors are getting the benefits of three distinct advantages:
- Profound Experience: BMO GAM’s portfolio management team boasts an extensive tenure, surpassing a decade in effectively steering covered call ETFs. Our seasoned understanding of the nuanced intricacies and inherent risks equips us to deliver a smoother client experience.
- Transparency Commitment: Our commitment to transparency is evident in both the Fund and its underlying holdings. Investors benefit from a clear insight into their portfolio holdings and the overarching investment strategy, fostering a relationship founded on clarity and trust.
- Comprehensive Experience: Embracing a collaborative ethos, our management approach leverages a broad spectrum of expertise. The inclusion of our Multi-Asset Solutions Team as one of the levers in the decision-making process amplifies the breadth of experience at play, ensuring a judicious and multifaceted approach to investment management.
1Standard performance data:
Fund/Index |
YTD |
1 Yr |
3 Yr |
5 Yr |
Since Inception |
BMO Global Enhanced Income Fund – Series F |
8.53% |
16.39% |
9.07% |
||
MSCI World Index |
9.01% |
25.72% |
9.13% |
12.63% |
8.48% |
MSCI World High Div Index |
5.79% |
14.31% |
7.11% |
8.21% |
8.76% |
As of March 29, 2024.
2 As at April 23, 2024
3 Standard performance data:
Fund |
YTD |
1 Yr |
3 Yr |
5 Yr |
Since Inception |
ZWG |
8.38% |
15.48% |
7.90% |
7.64% |
|
ZWH |
9.26% |
13.00% |
8.51% |
9.05% |
10.90% |
ZWC |
4.20% |
8.52% |
7.52% |
5.65% |
5.19% |
ZWE |
6.78% |
13.44% |
10.94% |
8.07% |
7.64% |
ZWS |
6.86% |
11.59% |
6.32% |
7.72% |
6.86% |
ZWT |
18.69% |
58.23% |
18.22% |
17.58% |
|
ZWB |
4.89% |
10.64% |
5.26% |
7.21% |
8.03% |
ZWEN |
11.56% |
20.57% |
9.12% |
As of March 29, 2024.
FOR ADVISOR USE ONLY.
Commissions, management fees and expenses all may be associated with investments in BMO ETFs and ETF Series of the BMO Mutual Funds. Please read the ETF facts or prospectus of the relevant BMO ETF or ETF Series before investing. The indicated rates of return are the historical compounded total returns including changes in share or unit value and the reinvestment of all dividends or distributions and do not take into account the sales, redemption, distribution, optional charges or income tax payable by the unitholder that would have reduced returns BMO ETFs and ETF Series are not guaranteed, their values change frequently and past performance may not be repeated.
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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.
Distribution yields are calculated by using the most recent regular distribution, or expected distribution, (which may be based on income, dividends, return of capital, and option premiums, as applicable) and excluding additional year end distributions, and special reinvested distributions annualized for frequency, divided by current net asset value (NAV). Distributions are not guaranteed, may fluctuate and are subject to change and/or elimination. Distribution rates may change without notice (up or down) depending on market conditions and net asset value (NAV) fluctuations. The payment of distributions should not be confused with a BMO Mutual Fund’s performance, rate of return or yield. If distributions paid by a BMO Mutual Fund are greater than the performance of the investment fund, your original investment will shrink. Distributions paid as a result of capital gains realized by a BMO Mutual Fund, and income and dividends earned by a BMO Mutual Fund, are taxable in your hands in the year they are paid. Your adjusted cost base will be reduced by the amount of any returns of capital. If your adjusted cost base goes below zero, you will have to pay capital gains tax on the amount below zero.
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