BMO is the newest player in the ETF arena in Canada, and it has aggressively tried to undercut the low fees of its competitors: its large-cap Canadian equity fund, the Dow Jones Canada Titans 60 (ZCN), is marketed as the cheapest equity ETF in the country.
However, like Claymore, BMO lists its only the funds’ “Maximum Annual Management Fee” on its website, not its total management expense ratio. To find the MERs, you need to look on pages 51 and 52 of the latest prospectus. In some cases the differences are three or four basis points, while in others you’re looking at an extra 10 or 12:
| Mgmt Fee | MER | Difference | ||
| Dow Jones Canada Titans 60 | ZCN | 0.15 | 0.18 | 0.03 |
| S&P/TSX Equal Weight Banks | ZEB | 0.55 | 0.60 | 0.05 |
| S&P/TSX Equal Weight Oil & Gas | ZEO | 0.55 | 0.60 | 0.05 |
| US Equity | ZUE | 0.22 | 0.33 | 0.11 |
| Dow Jones Industrial Average | ZDJ | 0.23 | 0.33 | 0.10 |
| International Equity | ZDM | 0.46 | 0.50 | 0.04 |
| Emerging Markets Equity | ZEM | 0.54 | 0.58 | 0.04 |
| Canadian Government Bond | ZGB | 0.33 | 0.45 | 0.12 |
| Short Corporate Bond | ZCS | 0.30 | 0.35 | 0.05 |
Again, the cost of currency hedging (which is used in ZUE, ZDJ and ZDM) is not included in the MER, but will be an additional drag on returns.
All of these ETFs are less than year old, so it’s possible that they have some start-up costs here that will decline as the funds grow. But whatever cost advantage BMO funds seem to have at first blush, the true MERs reveal that they’re actually costlier than many iShares counterparts.
Part 1: Unpacking ETF Fees
Part 2: Claymore
Part 4: iShares
{ 2 comments… read them below or add one }
Again this is very interesting to me, i had no idea that some ETF providers could get away with disclosing only management costs (even though they represent the bulk of the MER). Clearly cost (MER) is an important consideration but it’s not the only one, obviously. The thing about these new BMO offerings is that their volumes are so low that bid/ask spread is significant!
this is so tiresome… why does the investor constantly have to mine for ways s/he can be screwed? my kingdom for transparency! thanks for the heads up, CP!