IRR Updates for BMO Target Maturity Bond ETFs
Apr. 25, 2025Target Your Fixed Income ETFs with Precision
As Canada’s largest fixed income ETF provider1, BMO Exchange Traded Funds is now offering Target Maturity Bond ETFs! Whether the goal is cashflow generation, education funding, or purchasing a home, BMO’s Target Canadian Corporate Bond ETFs provide more yield to maturity (YTM)2 certainty to help investors meet their financial objectives3.
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* Internal Rate of Return Source: BMO GAM as of April 25, 2025.
Get the Precision of a Bond, with the Liquidity and Diversification of an ETF!
Important Key Points:
- ETFs with an Individual Bond Like Experience – These ETFs are designed to act like an individual bond with a defined maturity and the reduction of duration risk2 over time.
- Not Your Typical Target Maturity Bond ETF – Unlike traditional target maturity ETFs, the goal of these ETFs is to not transition into cash in the year of maturity to manage performance and YTM outcome expectations.
- Get More YTM Certainty – These ETFs hold a static portfolio and will not rebalance providing greater yield certainty for investors upon maturity.
- Personal Goal Setting – Similar to holding an individual bond, investors can have the ability to match the ETFs’ maturity dates with their investment time horizons.
- Management Fee of Only 0.15% – The consideration of fees in your investment decision making process is important as fees can impact overall performance.
- Risk2 Rating – Low
- To learn more about BMO’s New Approach to Target Maturity Bond ETFs please visit our:
Target Your Fixed Income ETFs with Precision PDF
FAQs PDF
Video
* Internal Rate of Return Source: BMO Global Asset Management as of March 17, 2025. The internal rate of return (IRR) is the annual rate of growth that a fixed income ETF is expected to generate if held to maturity. IRR calculations on are based on the fund’s NAV, scheduled net flows from the bond portfolio and hedges, and annual compounding for that specific point of time. IRRs are generally updated on a weekly basis, and are before commissions, management fees and expenses. Distributions, yields, and rates are not guaranteed and are subject to change and/or elimination. Past IRR performance is not indicative of future IRR performance.
1 Source: Bloomberg January 31, 2025.
2 Yield to maturity (YTM): The total expected return from a bond when it is held until maturity – including all interest, coupon payments, and premium or discount adjustments.
3 Duration & Duration Risk: A measure of the sensitivity of the price of a fixed income investment to a change in interest rates.
Duration is expressed as number of years. The price of a bond with a longer duration would be expected to rise (fall) more than the price of a bond with lower duration when interest rates fall (rise). Essentially, duration estimates the percentage change in a bond’s price for a change in interest rates. This sensitivity is what constitutes the risk: as interest rates rise, bond prices fall, and vice versa.
CLOs are floating- or fixed-rate debt securities issued in different tranches, with varying degrees of risk, by trusts or other special purpose vehicles (“CLO Issuers”) and backed by an underlying portfolio consisting primarily of below investment grade corporate loans. The BMO ETF pursues its investment objective by investing, under normal circumstances, at least 85% of its net assets in CLOs that, at the time of purchase, are rated AAA or the equivalent by a nationally recognized statistical rating organization.
AAA herein refers to the order of payments, should there be any defaults, and does not represent the ratings of the underlying loans within the CLO. If there are loan defaults or the CLO Issuer’s collateral otherwise underperforms, scheduled payments to senior tranches take precedence over those of mezzanine tranches (a tranche or tranches subordinated to the senior tranche), and scheduled payments to mezzanine tranches take precedence over those to subordinated/equity tranches. The riskiest portion is the “Equity” tranche, which bears the first losses and is expected to bear all or the bulk of defaults from the corporate loans held by the CLO Issuer serves to protect the other, more senior tranches from default.
The portfolio holdings are subject to change without notice and only represent a small percentage of portfolio holdings. They are not recommendations to buy or sell any particular security.
BMO Global Asset Management is a brand name that comprises BMO Asset Management Inc. and BMO Investments Inc.
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 guaran- teed 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.
This material is for information purposes only. The information contained herein is not, and should not be construed as investment, tax or legal advice to any party. Particular investments and/or trading strategies should be evaluated and professional advice should be obtained with respect to any circumstance.
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