ZWU - BMO Covered Call Utilities ETF

Enhanced Cashflow with Covered Calls

This is the second quarter for our Tax efficient portfolio.* This portfolio is meant to follow the same fundamental framework as our Balanced Portfolio, though the instruments are adjusted to be more tax efficient for Canadian investors.

In our first ​‘Tax Efficient’ Portfolio, we are following the same fundamental rationale as our ​‘Balanced Portfolio’ with a few caveats. First, we are prioritizing capital gains over income. This means focusing more on discount bonds in the fixed income sleeve of our portfolio while also continuing to prioritize shorter duration products.

As an example, we have removed ZBI and replaced it with ZCDB (BMO Corporate Discount Bond ETF) at a lower weight. We are also increasing the weight of ZDB in this portfolio to 10% (from 5% in our balanced fund).

Second, we are prioritizing Canadian and U.S. underlying holdings over international investments. That means a greater weight for core exposures in ZCN and ZUQ. At the same time, we are removing ZIQ and ZEM.

For the tactical exposures, we have elected to go with a covered call strategy for Tech ZWT (BMO Covered Call Technology ETF) as well as a covered call strategy for Utilities ZWU (BMO Covered Call Utilities ETF). Both allow us to earn tax efficient income in sectors that we think should still continue to perform.

Additionally, both of the aforementioned strategies will help to make up for the relatively lower income that comes with utilizing discount bond ETFs in the fixed income sleeve.

We are also removing our exposure to ZGI (BMO Global Infrastructure Index ETF) and reallocating that to ZLSC (BMO Long Short Canadian Equity ETF).