BMO has lowered the cost of its bond ETF range by -43% from 30bp to 17bp as it passes through the economies of scale to end investors.
BMO’s bond ETFs offer access to the global corporate bond market, whilst giving investors the choice to select their preferred exposure, as defined by maturity.
iShares offers the most popular London-listed global corporate bond ETF (CRPS). This tracks the Bloomberg Barclays Global Aggregate Corporate Bond Index at 0.20% TER. Its GBP-hedged version (CRHG) understandably costs slightly more at 0.25% TER for the convenience of in-built currency hedging.
Like iShares, BMO also offers a GBP-hedged range, but has a more nuanced approach by offering investors a choice of three different ETFs each with a different maturity range: 1 to 3 years (ZC1G), 3 to 7 years (ZC3G) and 7 to 10 years (ZC7G). This compares to the average maturity of the main index of approximately 9 years.
The ability to access this exposure by maturity is particularly useful for UK institutional and pension scheme investors who are looking to construct liability-relative portfolios where both duration and currency controls are important to avoid asset-liability mismatches.
The BMO range has gathered some £117m AUM since launch in November 2015 (inflows of £3m per month on average). This compares to iShares' CRPS size of £824m since launch in September 2012 (inflows of £12m per month on average).
As the advantages of bond investing with ETFs become more apparent (secondary liquidity, transparent exposure, daily disclosure of underlying), we expect increasing price competition and greater nuance within the most popular strategies.
ZC1G BMO Barclays 1-3 Year Global Corporate Bond (GBP Hedged) 0.17% TER
ZC3G BMO Barclays 3-7 Year Global Corporate Bond (GBP Hedged) 0.17% TER
ZC7G BMO Barclays 7-10 Year Global Corporate Bond (GBP Hedged) 0.17% TER
CRPS iShares Global Corporate Bond (Unhedged) 0.20% TER
CRHG iShares Global Corporate Bond (GBP Hedged ) 0.25% TER
(All ETFs mentioned are UCITS ETFs listed on the London Stock Exchange)
ETF Investment Strategy