5 for 5: Lowering Volatility with BMO ETFsAug. 31, 2022
- Theme: Ultra Short Term Fixed Income
- Investment-grade bonds with <1-year maturity, held until maturity
- Low duration of 0.52 to mitigate risk of increasing interest rates
- Low 1-year volatility of 1.0%; yield to maturity of 3.7%
- Theme: Covered Call Utilities
- Utilities, Energy Pipelines, Telecoms provide overall defensive positioning
- Addition option income stream serves to dampen volatility
- 1-year volatility of 8.6% vs. 13.1% for S&P/TSX Composite Index, with a 2-year correlation of 0.58 and a 3-year correlation of 0.851
- Theme: Low Volatility Canada
- Overweight defensive sectors and lower beta companies
- Provides improved risk-adjusted return benefits vs index historically2
- 1-year volatility of 9.1% vs. 13.1% for S&P/TSX Composite Index, with a 2-year correlation of 0.74 and a 3-year correlation of 0.911
- Theme: Low Volatility US
- Underweight Technology (higher beta), and overweight defensive sectors (Staples, Utilities, Real Estate)
- Benefitting in 2022 from the shift away from Growth, and into defensives/Value
- 1-year volatility of 12.0% vs. 18.9% for S&P 500 Index, with a 2-year correlation of 0.58 and a 3-year correlation of 0.751
- Theme: Infrastructure
- Invested in infrastructure equities with defensive income streams
- Partially hedged to inflation, and strong underlying demand
- 1-year volatility of 12.7% vs. 16.4% for MSCI World Index, with a 2-year correlation of 0.48 and a 3-year correlation of 0.681
Source: Bloomberg August 31, 2022
1 2-year correlation data is daily as of August 31, 2022; 3-year correlation data is monthly as of August 31, 2022.
2 Bloomberg, as of August 31, 2022. ZLB 10-year risk-adjusted performance relative to S&P/TSX Composite.
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