FRANKFURT AM MAIN – The annual pace of inflation is approaching 5% in Canada, an all-time high in 30 years. Combined with low yields, investors face challenges around their fixed income portfolio allocations. BMO Asset Management Inc. offers investors convenient access to a portfolio of unique high yielding fixed income securities through the BMO Canadian Bank Income Index ETF (ZBI). This ETF seeks to replicate the performance of the Solactive Canada Bank Income Index.
The Solactive Canada Bank Income Index aims to track the performance of bonds, NVCC bonds, LRCN instruments, and preferred shares issued by Canadian banks in Canadian Dollars (CAD). The index is divided into three independent buckets: bonds, LRCN, and preferred shares. The bond bucket contains bonds and NVCC bonds; the LRCN bucket holds institutional preferred shares and LRCN instruments; lastly, the preferred shares bucket holds listed preferred shares securities. The index is reconstituted monthly to capture new issuance. There are minimum market capitalization and minimum average daily value traded requirements on new and current index components.
The ETF began trading on February 10th, 2022, on the Toronto Stock Exchange (TSX) under the ticker symbol ZBI.
Timo Pfeiffer, Chief Markets Officer at Solactive, says: “The Canadian banking system has been consistently ranked among the soundest in the world. With the wave of inflation and the low yield environment, we are excited to be partnering with BMO once more on a product featuring a portfolio of Canadian bank securities.”
Mark Raes, Head of Product (Canada) at BMO Asset Management, comments, “Investors are looking for innovation in the fixed income market; by including LRCNs and preferred shares, we can shorten duration and obtain higher yield than the aggregate bond market. This solution also gives investors access to certain market segments typically only accessible by institutions.”