HISA ETFs – What Is the Impact Going Forward?
Nov. 20, 2023
After the long-awaited review of HISA ETFs, the office of the Superintendent of Financial Institutions (OSFI) ruled to uphold 100% liquidity requirements on HISA ETFs.
What Is the Impact Moving Forward?
- HISA ETF gross yields are estimated to drop by 0.50% (to 5%) after January 31, 2024 (TD Securities Estimate).
- OSFI set new liquidity guidelines for deposits from HISA ETFs, which mandates that these deposits are carried with a 100% liquidity coverage ratio (LCR) runoff factor by January 31, 2024.
- Despite a drop in yields, HISA ETFs will remain competitive in pricing and it is not expected to impact liquidity.
- This ruling DOES NOT impact stand alone HISA accounts
- As of October 18, 2023, HISA ETFs and mutual funds have total assets of $29 billion, with $26.1 billion in CAD HISA funds and $2.9 billion in USD HISA funds1
Official Release: OSFI upholds 100% liquidity requirement for HISA ETFs to promote financial resilience (osfi-bsif.gc.ca)
Not All Cash Products Are Created Equal
NEW! BMO USD Cash Management ETF (Ticker: ZUCM/ZUCM.U) invests primarily in short-term U.S. Treasury Bills (under one year) which are backed by the US Government. The ETF may hold other short-term fixed income investments of appropriate term, quality and yield. This 100% investment-grade ETF will aim to seek capital preservation, ensuring high levels of liquidity, while generating regular monthly income.
BMO Money Market Fund ETF Series (Ticker: ZMMK) provides exposure to high-quality money market instruments issued by governments and corporations in Canada, including treasury bills, bankers’ acceptances, and commercial paper that have a maturity in less than 365 days and have an average term-to-maturity of less than 90 days.
BMO Ultra Short-Term Bond (Ticker: ZST/ZST.L) and BMO Ultra Short Term US Bond (Ticker: ZUS.U/ZUS.V) primarily hold investment-grade bonds that mature in one year or less. Given the bonds in our ultra-short-term bond ETFs are near maturity, they tend to be highly liquid. Bonds in these ETFs are selected to provide attractive yield and diversification, while being conservative.
BMO USD Cash Management ETF (Unhedged)
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BMO USD Cash Management ETF (USD Units)
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BMO Money Market Fund ETF Series
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BMO Ultra Short-Term Bond (Distributing Units)
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BMO Ultra Short-Term Bond (Accumulating Units)
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BMO Ultra Short-Term US Bond (Distributing units)
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BMO Ultra Short-Term US Bond (Accumulating units)
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Source: BMO Global Asset Management, as of October 31, 2023.
Annualized Distribution Yield: The most recent regular distribution, or expected distribution, (excluding additional year end distributions) annualized for frequency, divided by current NAV.
1 Bloomberg, as of October 18, 2023.
* A management fee waiver of 16 bps was implemented on November 30, 2021. The estimated MER represents what the MER would be with the reduction in place for the entire year.
† Risk is defined as the uncertainty of return and the potential for capital loss in your investments.
Disclosures:
Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the ETF Facts or prospectus of the BMO ETFs before investing. Exchange traded 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 ETFs, please see the specific risks set out in the BMO ETF’s prospectus. BMO ETFs 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.
BMO ETFs are managed by BMO Asset Management Inc., which is an investment fund manager and a portfolio manager, and a separate legal entity from Bank of Montreal.
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