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BMO Floating Rate High Yield ETF - ZFH

ETF Overview

The fund provides exposure to high yield credit with minimal duration risks.

The Fund invests in CAD T-Bills targeting an average weighted maturity of 90 days to minimize interest rate risk.

To enhance the yield, the Fund gains exposure to a diversified basket of US high yield (non-investment grade) issuers through the use of credit default swaps (CDS).

Exposure through CDS provides the fund with several benefits, including central clearing, liquidity, pricing transparency, counterparty assurance, and regulatory oversight.

Additional Index Information

Not applicable.

Key ETF Data

Fundamentals
Category (main) Canadian Fixed Income - Floating rate & High Yield (non-investment grade)
Underlying Index None
ETF Structure Active management. No index
Asset Class Fixed Income - Floating rate notes & High Yield (non-investment grade)
Region Canada
Issuer BMO
ETF Home Page Available here

* We are including this ETF in both passively-managed and actively-managed listings. The fund's active management is low-cost and basic.

Fund Facts
Inception Date Feb 10, 2014
Total Holdings 5
Distribution Frequency Monthly
Leverage None
Significant Currency Exposure No
Currency Hedging Not applicable
Fees
Management Fee 0.40%
Management Expense Ratio (MER) 0.45%
Trading Information
Ticker ZFH
Exchange TSX (Toronto Stock Exchange)
Currency CAD
Eligibility
Eligibility * RRSP, RRIF, RESP, TFSA, DPSP, RDSP
DRIP available ** Yes
PACC Plan available ** Unknown
SWP available ** Unknown

* Always check eligibility with your plan operator as plans and accounts can differ

** Not all brokers can facilitate these plans. Check with your broker.

Current Price, Fund Performance, Yield, NAV, Charts etc

To view the TSX or Morningstar fund page for this ETF click on the Fund Data menu tab or below:

ETF at TMX ETF at Morningstar

ETF Analysis

Bonds/fixed income funds should be an important component in most investment portfolios. The general rule of thumb is that you should have the percentage equivalent in bonds as per your age. So if you are 30, your portfolio should comprise 30% bonds/fixed income funds.

However the bond markets are in near unprecedented territory. Years of central bank stimulus packages and ultra-low interest rates since 2008's Financial crisis have created a massive bubble.

Many analysts including Peter Boockvar, managing director and chief market analyst at The Lindsey Group, agree. He stated in July 2016 that the bond market is in an ‘epic bubble of colossal proportions’.

Until the buddle bursts, we cannot recommend buying bonds/fixed income funds.

If you absolutely have to buy bonds/fixed income funds then ensure you always check the Yield To Maturity (YTM), also known as the Weighted Average Yield To Maturity.

The YTM is much more important than the bond's current yield (also called the current distribution yield).

The YTM (unlike current yield) considers not only the coupon income, but any capital gain or loss that an investor will realize by holding the bonds to maturity. It also considers reinvestment of the coupons.

Unfortunately the frothy bond market has meant many fixed income ETFs have had to purchase many bonds at a premium. An ultra-low rate environment and purchasing bonds at a premium makes for a particularly terrible climate for income seekers, and new fixed income investors.

Protect yourself by understanding YTM and checking the YTM of any fixed income security you are considering purchasing. Also understand quality ratings, duration and maturities.

Be particularly aware of fund fees. What is the fund's MER ()? An MER of 0.40% may not sound like much but fixed income funds are supposed to be less risky than equities (bond market bubbles such as the current one excepted) so their returns are typically considerably less. Consequently an MER of 0.40% may actually be a significant portion of any investment return from a bond/fixed income fund. Bond ETFs with sub 0.20% MERs are available.