Friday, October 30, 2009

BMO Launches 9 New ETFs: Novelties And Cannibalism at Its best

BMO has lauched 9 new ETFs this week, including some novelties, and two commodity-related ETFs (oil and base metals).

Gilles Ouellette, head of BMO's wealth management business said about ETFs: “It's a product where the margins are quite slim, so I don't think there's room for everybody.

ETFs have relatively low profit margins for a bank, but because they are so popular as investors dump the outrageosuly expensive bank mutual funds they generate trading and advice fees.

And so BMO plans to continue the expansion of its nascent ETF business, despite the risk that it could eat away at its more profitable mutual fund offerings (Financial Post).

Mr. Ouellette sdays that “there is obviously going to be a certain amount of cannibalism.” “But we expect that this product is going to grow independent of mutual funds.”

These are the new ETFs:

-BMO Short Federal Bond Index ETF (ZFS)
-BMO Short Provincial Bond Index ETF (ZPS)
-BMO Short Corporate Bond Index ETF (ZCS)
-BMO High Yield US Corporate Bond Hedged to CAD ETF (ZHY)
-BMO S&P/TSX Equal Weight Banks Index ETF (ZEB)
-BMO S&P/TSX Equal Weight Oil & Gas Index ETF (ZEO)
-BMO International Equity Hedged to CAD Index ETF (ZDM)
-BMO Emerging Markets Equity Index ETF (ZEM)
-BMO S&P/TSX Equal Weight Global Base Metals Hedged to CAD IndexETF (ZMT)

BMO's 4 existing ETFs are:

-BMO Canadian Government Bond Index ETF (ZGB), CitigroupCanadian Government Bond Index.
-BMO Dow Jones Canada Titans 60 Index ETF (ZCN), Dow Jones Canada Titans 60 Index.
-BMO US Equity Hedged to CAD Index ETF (ZUE), Dow Jones U.S. Large-Cap Index (CAD hedged).
-BMO Dow Jones Industrial Average Hedged to CAD Index ETF (ZDJ), Dow Jones Industrial Average (CAD hedged).

You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

The novelties are the equal weighted ETFs, where weights are maintained so that not one individual stock takes over the portfolio. This could be a good idea. The other novelty is the currency hedging for the metals ETFs. This one is mind boggling and needs to be looked further as it could well take away all the benefits of metals going higher.

"BMO S&P/TSX Equal Weight Global Base Metals Hedged to CAD Index ETF has been designed to replicate, to the extent possible, the performance of the S&P/TSX Equal Weight Global Base Metals Hedged to CAD Index. The fund may invest in exchange-traded funds, mutual funds or institutional pooled funds, ADRs or derivative instruments. The fund exposure will be hedged back to Canadian dollars."

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