Comments on: More Exchange-Traded Funds from BMO

By: BMO expands its ETF line up (again) | Canadian Capitalist

BMO expands its ETF line up (again) | Canadian Capitalist — Tue, 26 Jan 2010 03:35:09 +0000

[...] 25th, 2010 · No Comments Last Fall, BMO expanded its lineup of ETFs by 9 new funds. Recently, BMO has once again added nine new ETFs to its lineup. They [...]

By: Canadian Capitalist

Canadian Capitalist — Fri, 30 Oct 2009 14:52:20 +0000

I should point out that I compared bid-ask spreads between XIU and ZCN in my RBC Direct Investing account before writing that the bid/ask spread for ZCN is “wide”. I did not note down the exact numbers.

On Oct. 29, on market open ZCN showed a bid
of $15.49 and ask of $15.52, a spread of 3 cents. XIU, on the other hand, showed a bid of $16.32 and ask of $16.33, a spread of 1 cent. This is to be expected as ZCN showed a volume of 2,000 compared to XIU’s volume of 2,000,000.

However, right now, ZCN shows a bid/ask of 15.56/15.57 and XIU 16.35/16.36. But volume for ZCN is just 310 compared to over 5,000,000 for XIU.

By: Canadian Capitalist

Canadian Capitalist — Fri, 30 Oct 2009 14:47:59 +0000

Readers might be interested in this note from Rajiv Silgardo, head of BMO ETFs, published here with permission:

“BMO’s ETFs trade at a 1 cent spread and the mkt maker stands ready to buy or sell 10,000 shares at those prices. And he/she can check that on any quote machine when the market is open for trading. This is very tight in terms of spread and BMO is confident that it will lead to great secondary market liquidity.”

By: Rick

Rick — Thu, 29 Oct 2009 19:48:03 +0000

Actually, I think the short-term provincial bond is great. It is targeted at people who want a little more yield than federal without going corporate. In the middle of risk/reward range.

By: Finance Matters

Finance Matters — Tue, 27 Oct 2009 19:57:59 +0000

I know Trimark has started putting some ETFs into in their Fund of Fund products. Perhaps BMO will do the same, adding some exposure to their ETFs into some of their mutual funds? Might be a good way to offer a lower MER mutual fund, a fund of ETF’s!

By: Rob

Rob — Tue, 27 Oct 2009 18:36:45 +0000

Certainly, the more knowlegable the invesor, the more they will be attracted to ETFs with ample volume, liquidity in terms of narrow bid-asked spreads, and lowest MERS.

I think BMO is banking on being able to move those customers so inclined to an ETF to the produt by those who really won’t care about such details. There are plenty of them.

By: Canadian Capitalist

Canadian Capitalist — Tue, 27 Oct 2009 15:28:16 +0000

@Mike: Even with a major promotional campaign, I don’t see how BMO is going to make these ETFs popular. iShares has a huge headstart and investors are not going to attracted by the tiny MER differences.

@Rob: Yes, the ETF business is very profitable. It’s not just the MERs; there is also securities lending. I’m fine with that. After all, we’re capitalists, not communists — profit isn’t a dirty word here. We also have nothing against lower-cost active funds; it’s the high-cost, index-hugging, funds that we rage against

By: Rob

Rob — Tue, 27 Oct 2009 14:02:02 +0000

I know many CC readers think mutual fund companies actually cause cancer, and ETF providers are benevolent contributors to society, but let’s be clear about one thing….

Although low cost, ETFs provide a huge margin, because the costs are so much lower than hiring management, providing a structure that allows for open ended products with many redemptions and purchases. Just because ETFs are cheap does not mean they aren’t very, very profitable (once scale is reached).
Please….BMO isn’t getting into this business to lower their profit margin.

By: Four Pillars

Four Pillars — Tue, 27 Oct 2009 12:59:46 +0000

I don’t see how they are going to make these ETFs work. The products are fine, the MERs are good enough but unless they do a major promotional campaign then nobody will buy them since most ETF owners already have iShares or Vanguard.

I could be wrong but I can’t see them promoting these low-margin products over their normal high-priced mutual funds.