BMO Canadian ETF Dashboard

— as of May 31, 2019 —

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ZLB: Slow and Steady Wins the Race

Chris Heakes

ZLB: Slow and Steady Wins the Race

Snapshot
As headlines, rhetoric and trade wars continue to stir market volatility, ZLB offers a “slow and steady” approach for investors to stay invested in equities. Adding this exposure to your client’s portfolios can:

  • Reduce overall downside capture. Based on a careful equity selection process, ZLB offers a risk-adjusted profile that protects against sharp price swings.
  • Provide better upside participation. Levering the accretive power of the “low volatility anomaly,” ZLB is able to capture equity gains while maintaining a lower risk profile.
  • Enhance diversification within Canadian equities. ZLB is underweight Energy and Materials, for a more defensive sector allocation that balances the resource bias of the Canadian market.

Details
BMO Low Volatility Canadian Equity ETF (Ticker: ZLB)

Benefits
Continued equity exposure. Smoother returns. Increased downside protection. 

Trade Idea – Add Value with ZLB
Renewed uncertainty in the U.S.-China trade war is driving greater interest in strategies capable of outperforming in up and down cycles. To this end, ZLB is a proven tool for risk mitigation without sacrificing upside participation. It is a cornerstone piece which can provide a smoother return profile, and punch above its weight in a bull market. As demonstrated in the chart below, when Canadian equities declined by approximately 15% in the fourth quarter of 2018, ZLB trailed far behind at less than 5% losses. However, during the next quarter, when a resurgence of optimism drove the market up 13%, ZLB kept pace on the upswing, adding 12% to achieve a much more attractive overall return profile. 

bmo-etfs_05ZLBchart848px_2019-06-09_ENG.jpg#asset:2915

What’s the secret sauce in ZLB? Answer: The “Low Volatility Anomaly” – an empirically proven strategy showing that lower risk stocks have a tendency to outperform across a longer time horizon. Historical data of the last 90 years affirms the ability of lower risk assets to deliver greater returns, both absolute and risk-adjusted, owing to the simple fact that they retain value better in down cycles. With an underweight to the higher risk Energy and Material sectors, and overweight to the more stable-earnings profile of low-volatility companies, ZLB is better positioned to provide meaningful protection and add value for clients. 

 The results speak for themselves: ZLB is a 5-star Morningstar-rated fund,1 FundGrade A+ Winner for five consecutive years,2 the best risk-adjusted return in the Canadian Equity category1 and the top- performing Canadian Equity Fund over five years.1 It is also accessible as an ETF or mutual fund, in recognition of the demand for greater portfolio customization.

Name Ticker YTD* 1 Year* 3 Year* 5 Year* Since Inception* Period Ending*
BMO Low Volatility Canadian Equity ETF ZLB 15.4% 13.0% 9.1% 11.6% 13.7% 31/05/2019
BMO S&P/TSX Capped Composite Index ETF ZCN 13.3% 3.0% 7.6% 5.0% 6.6% 31/05/2019

* October 26, 2011. Annualized returns are net of fees.

Outlook
While the Federal Reserve’s “wait and see” policy allowed for softer economic conditions thus far in 2019, headline risk remains an ongoing issue, particularly with a break down in trade negotiations between the U.S. and China. ZLB is a proven strategy that has added value in both down and up markets, and an ideal solution to get exposure to Canadian equities in the current environment.

BMO Low Volatility Canadian Equity Strategy Fund Code Estimated MER
ETF (BMO Low Volatility Canadian Equity ETF) Ticker: ZLB 0.39%
Series F - Mutual Fund GGF95772 0.39%*
Advisor Series - Mutual Fund GGF99772 1.53%*

Management Expense Ratios (MERs) are the audited MERs as of September 30, 2018.
*As the series of funds are less than one year old, actual Management Expense Ratio costs will not be known until the fund financial statements for the current fiscal year are published.
The estimated MER is an estimate only of expected fund costs until the completion of a full fiscal year, and is not guaranteed.

Resources:
BMO Low Volatility CDN Equity ETF Fund – Sales Aid >
Low Volatility Whitepaper >
The Value of Savings – Sales Aid >


 

 

1 Morningstar Direct. As at March 31, 2019. 5 Year Sharpe Ratio used to determine risk adjusted return. Past performance is no guarantee of future results. Category is Morningstar Canadian Equity Category. © 2019 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The Morningstar Rating™ for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Ratings are subject to change monthly. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star.  The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three- year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. For more details on the calculation of Morningstar star ratings or quartile rankings, please see HYPERLINK “http://www.morningstar.ca” www.morningstar.ca. The star ratings and numbers of Canadian Equity funds for the BMO Low Volatility Canadian Equity ETF (ZLB) for each period are as follows: for three years 5 stars (108 funds), five years 5 stars (127 funds). BMO Low Volatility Canadian Equity ETF (inception date October 21, 2011) performance over 1 year (13.76%), 3 Year (9.72%), 5 Year (11.23%), and Since Inception (13.67%).

2 BMO Low Volatility Canadian Equity ETF (ZLB) won the award in 2014, 2015, 2016, 2017, 2018. FundGrade A+® is used with permission from Fundata Canada Inc., all rights reserved. The annual FundGrade A+® Awards are presented by Fundata Canada Inc. to recognize the “best of the best” among Canadian investment funds. The FundGrade A+® calculation is supplemental to the monthly FundGrade ratings and is calculated at the end of each calendar year. The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade. To be eligible, a fund must have received a FundGrade rating every month in the previous year. The FundGrade A+® uses a GPA-style calculation, where each monthly FundGrade from “A” to “E” receives a score from 4 to 0, respectively. A fund’s average score for the year determines its GPA. Any fund with a GPA of 3.5 or greater is awarded a FundGrade A+® Award. For more information, see www.FundGradeAwards.com. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata.

Chris Heakes

ZLB: Slow and Steady Wins the Race

Snapshot
As headlines, rhetoric and trade wars continue to stir market volatility, ZLB offers a “slow and steady” approach for investors to stay invested in equities. Adding this exposure to your client’s portfolios can:

  • Reduce overall downside capture. Based on a careful equity selection process, ZLB offers a risk-adjusted profile that protects against sharp price swings.
  • Provide better upside participation. Levering the accretive power of the “low volatility anomaly,” ZLB is able to capture equity gains while maintaining a lower risk profile.
  • Enhance diversification within Canadian equities. ZLB is underweight Energy and Materials, for a more defensive sector allocation that balances the resource bias of the Canadian market.

Details
BMO Low Volatility Canadian Equity ETF (Ticker: ZLB)

Benefits
Continued equity exposure. Smoother returns. Increased downside protection. 

Trade Idea – Add Value with ZLB
Renewed uncertainty in the U.S.-China trade war is driving greater interest in strategies capable of outperforming in up and down cycles. To this end, ZLB is a proven tool for risk mitigation without sacrificing upside participation. It is a cornerstone piece which can provide a smoother return profile, and punch above its weight in a bull market. As demonstrated in the chart below, when Canadian equities declined by approximately 15% in the fourth quarter of 2018, ZLB trailed far behind at less than 5% losses. However, during the next quarter, when a resurgence of optimism drove the market up 13%, ZLB kept pace on the upswing, adding 12% to achieve a much more attractive overall return profile. 

bmo-etfs_05ZLBchart848px_2019-06-09_ENG.jpg#asset:2915

What’s the secret sauce in ZLB? Answer: The “Low Volatility Anomaly” – an empirically proven strategy showing that lower risk stocks have a tendency to outperform across a longer time horizon. Historical data of the last 90 years affirms the ability of lower risk assets to deliver greater returns, both absolute and risk-adjusted, owing to the simple fact that they retain value better in down cycles. With an underweight to the higher risk Energy and Material sectors, and overweight to the more stable-earnings profile of low-volatility companies, ZLB is better positioned to provide meaningful protection and add value for clients. 

 The results speak for themselves: ZLB is a 5-star Morningstar-rated fund,1 FundGrade A+ Winner for five consecutive years,2 the best risk-adjusted return in the Canadian Equity category1 and the top- performing Canadian Equity Fund over five years.1 It is also accessible as an ETF or mutual fund, in recognition of the demand for greater portfolio customization.

Name Ticker YTD* 1 Year* 3 Year* 5 Year* Since Inception* Period Ending*
BMO Low Volatility Canadian Equity ETF ZLB 15.4% 13.0% 9.1% 11.6% 13.7% 31/05/2019
BMO S&P/TSX Capped Composite Index ETF ZCN 13.3% 3.0% 7.6% 5.0% 6.6% 31/05/2019

* October 26, 2011. Annualized returns are net of fees.

Outlook
While the Federal Reserve’s “wait and see” policy allowed for softer economic conditions thus far in 2019, headline risk remains an ongoing issue, particularly with a break down in trade negotiations between the U.S. and China. ZLB is a proven strategy that has added value in both down and up markets, and an ideal solution to get exposure to Canadian equities in the current environment.

BMO Low Volatility Canadian Equity Strategy Fund Code Estimated MER
ETF (BMO Low Volatility Canadian Equity ETF) Ticker: ZLB 0.39%
Series F - Mutual Fund GGF95772 0.39%*
Advisor Series - Mutual Fund GGF99772 1.53%*

Management Expense Ratios (MERs) are the audited MERs as of September 30, 2018.
*As the series of funds are less than one year old, actual Management Expense Ratio costs will not be known until the fund financial statements for the current fiscal year are published.
The estimated MER is an estimate only of expected fund costs until the completion of a full fiscal year, and is not guaranteed.

Resources:
BMO Low Volatility CDN Equity ETF Fund – Sales Aid >
Low Volatility Whitepaper >
The Value of Savings – Sales Aid >


 

 

1 Morningstar Direct. As at March 31, 2019. 5 Year Sharpe Ratio used to determine risk adjusted return. Past performance is no guarantee of future results. Category is Morningstar Canadian Equity Category. © 2019 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The Morningstar Rating™ for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Ratings are subject to change monthly. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star.  The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three- year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. For more details on the calculation of Morningstar star ratings or quartile rankings, please see HYPERLINK “http://www.morningstar.ca” www.morningstar.ca. The star ratings and numbers of Canadian Equity funds for the BMO Low Volatility Canadian Equity ETF (ZLB) for each period are as follows: for three years 5 stars (108 funds), five years 5 stars (127 funds). BMO Low Volatility Canadian Equity ETF (inception date October 21, 2011) performance over 1 year (13.76%), 3 Year (9.72%), 5 Year (11.23%), and Since Inception (13.67%).

2 BMO Low Volatility Canadian Equity ETF (ZLB) won the award in 2014, 2015, 2016, 2017, 2018. FundGrade A+® is used with permission from Fundata Canada Inc., all rights reserved. The annual FundGrade A+® Awards are presented by Fundata Canada Inc. to recognize the “best of the best” among Canadian investment funds. The FundGrade A+® calculation is supplemental to the monthly FundGrade ratings and is calculated at the end of each calendar year. The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade. To be eligible, a fund must have received a FundGrade rating every month in the previous year. The FundGrade A+® uses a GPA-style calculation, where each monthly FundGrade from “A” to “E” receives a score from 4 to 0, respectively. A fund’s average score for the year determines its GPA. Any fund with a GPA of 3.5 or greater is awarded a FundGrade A+® Award. For more information, see www.FundGradeAwards.com. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata.