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BMO Financial Group

Why has BMO entered the Exchange Traded Fund (ETF) market?

The ETF market in Hong Kong has grown rapidly over the past 10 years because ETFs offer investors efficient and effective access to a wide variety of asset classes. We launched BMO ETFs in Hong Kong because these investments offer tremendous value for investors, giving them additional choices for their investment portfolio.

How do I invest in BMO ETFs?

BMO ETFs are traded on the Stock Exchange of Hong Kong and can be purchased through your broker, in the same way as buying and selling stocks.

What is your target market for BMO ETFs?

BMO ETFs are designed to serve the needs of all types of investors, whether they are institutional, retail or self-directed investors, or investors who deal through intermediaries.

Who should I contact about BMO ETFs if I have questions?

You can contact us at +852 3716 0990 or bmogamasiainfo@bmo.com.

What are the advantages of using BMO ETFs?

There are a number of advantages to using BMO ETFs:

  • Products that are Relevant

A market leader with commitment to provide purposeful innovation to meet diverse investor needs, suited for longer-term strategic investments and shorter-term tactical opportunities.

  • Institutional Quality

Managed by a very experienced ETF team that applies institutional approaches resulting in effective portfolio construction and ETF liquidity.

  • Broad Range of Solutions

BMO ETFs have been a market leader in introducing dividend based smart beta strategies as well as building a comprehensive suite of fixed income products.

What is BMO’s presence in Asia, and more specifically in Hong Kong?

We are the only Canadian bank locally incorporated in China, and have teams both in mainland China and Hong Kong.  We have a fully owned subsidiary, LGM Investments Limited, that specializes in Asian, Global Emerging Markets and Greater China equities investing and has been in the region for over 20 years. We also have a private bank business which has operations in both Hong Kong and Singapore.


ETFs - General

What are Exchange Traded Funds (ETFs)?

ETFs are open ended investment funds with shares that trade throughout the day on stock exchanges that allow investors to participate in the performance of various asset classes during normal investment trading hours. ETFs combine the advantages of investing in index funds, including diversification and low costs, coupled with the liquidity, transparency, efficiency and flexibility of investing in individual stocks.

How do I invest in an ETF?

Investors can buy and sell shares on a stock exchange through a financial advisor or brokerage account during normal operating hours.

How does an ETF work?

ETF assets grow through the increase of their price and through the offering of additional new units. Market trades by individual investors occur at market prices rather than NAV. Underwriters alleviate supply and demand imbalances by engaging in transactions with the fund itself, trading baskets of securities for very large blocks of shares. These transactions, which result in the creation or redemption of ETF shares, occur at net asset value (NAV).

What is the difference between an ETF's Net Asset Value (NAV) and its market price?

The NAV is calculated at the end of the daily trading session (in the same manner as mutual funds), while the market price is the value at which ETFs are traded throughout the day (NAV should be close to the market price).

What are the benefits of investing in ETFs?
  • Efficient access to core investments and focused market segments
  • Access to institutional strategies by retail clients
  • Provide intraday liquidity through buying and selling during the trading hours of the stock exchange
  • Flexibility to buy on margin or sell short
  • Diversification offers potentially lower risk than individual securities
  • Ability to have exposure to a portfolio of stocks or bonds
  • Portfolio transparency on a daily basis
  • Cost-efficient due to relatively low management fees
How do ETF stock prices increase or decrease?

As the prices of the underlying securities increase (decrease), the ETF's price increases (decreases).

What is tracking difference?

Tracking difference is the return difference between an ETF and its underlying benchmark/index over a certain period of time.

Who can buy ETFs?

Institutional investors; intermediaries such as Private Banks and Securities firms; and individual investors through brokers.

When placing a trade for an ETF, should I place a Market Order or Limit Order?

In general, it may be advisable to consider using limit orders when trading any security, including ETFs, especially with large amounts. This allows investors to control the price at which they are willing to buy or sell, something which can be very important in volatile markets.

What is the frequency of distributions?

BMO ETFs may pay distributions out of their income in cash on either quarterly or semi-annually basis. Generally, the greater the income in the fund, the higher the distribution frequency. The frequency can be found under the Prices & Performance tab of the individual product page. Capital gains resulting from a sale of the ETF's investments are usually distributed at the end of the year.

Who are the Participating Dealers (PDs) & Market Makers (MMs) for BMO’s HK ETFs ?

The role of Participating Dealers (PDs) is to help create (or redeem) ETF units as and when needed by investors. Their role helps access liquidity of the underlying securities that the ETF invests in.

The role of Market Makers (MMs) is to help ensure that there is always a bid and an offer price for investors on the stock exchange.

The list of our PDs and MMs is available on our website and also on the HK Exchange website.

How much experience does BMO have with ETFs?

The BMO ETFs are managed by a very experienced investment team which has a long track record of managing ETFs, indexed and smart beta strategies at BMO and their prior employers.

How do you decide which asset classes/investment strategies to launch in your ETFs?

Investor's needs are key to our choice of asset classes/investment strategies that we use in our ETFs. We believe that a broader array of relevant ETFs give investors more choices when building portfolios and allows them more flexibility to implement their investment strategies.

What is the total cost of investing in your ETFs?

Total cost of investing in BMO ETFs include the Total expenses (TER), including management fees of the fund, trading commissions and the exchange and related fees.


BMO ETFs

How do you choose the weighting methodology for your ETFs?

BMO ETFs track market capitalized indexes, equal weighted indexes, price weighted indexes, and factor weighted indexes. We consider multiple weighting strategies to deliver the optimal ETF exposure as sectors and industries can be skewed by high concentrations in one or two larger companies.

How is an off quarter change to an index reflected in the portfolio and what trading steps are taken in order to affect such change?

Whenever an Index Provider rebalances or adjusts an Index by adding securities to or subtracting securities from that Index, the applicable BMO ETF will generally adjust its exposure accordingly.

How often will BMO ETFs rebalance?

The BMO ETFs will rebalance based on the underlying index changes.

What is the expected bid / ask spread for the ETFs?

The bid/ask spread is the difference between the buying and selling price of the ETFs units. It normally is reflective of the costs to buy and sell the underlying securities that are in the ETF. Consistent with similar ETFs, we expect our funds to trade between 30 and 60 basis points wide reflecting the spreads of the underlying securities.

Are you developing more ETFs?

Our goal is to deliver a comprehensive line-up of BMO ETFs that meet the current and future needs of ETF investors. To do this we will be evaluating our ETF line-up on a regular basis and making additions as we identify opportunities.

Can non-Hong Kong residents invest in BMO ETFs?

Any investor can purchase BMO ETFs on the Hong Kong Stock Exchange just like a stock.

Why do you choose to offer Asian fixed income ETFs?

The majority of ETF assets are within a wide range of equity based products and investors haven't had the same level of choice within the fixed income universe. Fixed income ETFs offer investors access to the asset class and the benefits of portfolio diversification in a cost effective vehicle.

Why would I own an ETF over a mutual fund?

ETFs and mutual funds are both designed to provide easy access to a variety of investment options and both can be used to build an optimal portfolio that is right for each client. By expanding its range of investment products to include ETFs, BMO is giving investors additional choices so that they can make appropriate investment decisions tailored to meet their specific needs, whether it is on their own or with the assistance of a financial advisor.


ETFs - Products

What products are currently available?
Why would an investor invest in the BMO Asia High Dividend equity ETF, given its modest dividend yield?

Higher dividend stocks have outperformed lower dividend stocks over the long run. Market research from shows that investment in higher dividend stocks in the US provided more than twice the return of the stock market. Return from stocks that paid higher dividends and grew their dividends performed even better, returning about 2.5 times more than the stock market. Thus dividends are very important.

The BMO Asia High Dividend ETF is a diversified investment in over 150 high dividend paying companies. More importantly we ensure that these companies also have the ability to continue paying the high dividend and may in fact be able to increase them. Such companies tend to be higher quality and thus lower risk investments. Investors get the convenience, liquidity and diversification given an attractive yield in a single trade. And they also have the upside potential of these stocks.

I can buy the banks individually, why should I buy the BMO Hong Kong Banks ETF?

It is a simple solution where you buy one security and get exposure to the more liquid banks listed in Hong Kong. This ETF offers more diversified exposure than buying only a few of the bank stocks individually. With the ETF you do not need to select the banks, rebalance the portfolio and reinvest the dividends.

Why do we use USD denominated index for the bond ETF?

It is important that when investors buy a bond fund seeking the safety of bond investments, they get exposure to high credit quality bonds without assuming the currency volatility associated with local currency bonds. Since the Hong Kong dollar is pegged to the US dollar, a USD denominated bond index and the BMO Asia USD Investment Grade Bond ETF is particularly attractive for Hong Kong investors.

Are these synthetic funds?

No. These funds invest in cash equity or bond securities. No derivatives are held in the funds.

Do you plan to cross list any ETFs from Canada?

We have no specific plans to do this at this time.


Fund - Products

What is a fund?
A fund is a pool of investments managed by a professional portfolio manager. The portfolio manager invests the money on behalf of a group of investors who have similar investment goals. The fund’s goals are outlined in the fund objectives and how the portfolio manager invests the money to meet the fund’s objective are outlined in the fund’s strategies.
What is a unit trust and how is it different from a fund?
A fund is a general name given to collective investment schemes that pool together investors’ money. A unit trust is one particular type of legal structure for funds.
What are the benefits of investing in funds?
Funds offer many benefits including:
  • Professional Management – Decisions are made by investment professionals
  • Flexibility – Low minimums to start investing
  • Diversified Portfolio – Reduce risk by spreading investments across securities
  • Broad range of investments – Access to investment opportunities around the world, across various sectors, asset classes and geographies
  • Ability to buy and sell daily (depends on fund’s dealing frequency) – Conveniently access your money when you need it
Why does the net asset value of my fund fluctuate every day?
Funds are considered long-term investments. The net asset values of individual funds fluctuate based on the underlying investments held by the funds which are, in turn, affected by changes in interest rates, economic conditions, company news and other factors.

Funds invested in equities generally fluctuate more (or are more volatile) than those invested in fixed income securities, but also tend to provide higher returns over the long-term.
How do I invest in BMO Funds?
You can make an investment in BMO Funds through banks, fund platforms or financial advisors. For more information, please call our hotline at +852 3716-0990 or email us at bmogamasiainfo@bmo.com.
What is the minimum amount required to invest with BMO Funds?
The minimum investment amount for our funds is USD 5,000 or equivalent.
Do BMO Funds pay distributions?
Some classes of our funds pay distributions at the Manager’s discretion, and this is not guaranteed. Please refer to our BMO Fund Products Section for more information.
How can I find out more about BMO Funds?
Latest information on BMO Funds is available on the BMO Global Asset Management (Asia) Limited's website, as well as the published Prospectus, Product Key Facts Statement and Factsheets for each fund.


The foregoing is very general information.