Valerie: Welcome back to ETF Innovators, where we track the evolution of the global ETF industry and shine a spotlight on the leaders, ideas, and strategies powering the next wave of performance. Today I'm delighted to be joined by one of Canada's first and largest ETF issuers, Bill Bamber, CEO of BMO Global Asset Management. Thank you so much, Bill, for joining us.
Bill: Thank you, Valerie. It's great to be here.
Valerie: Now let's start at the top. BMO, you've built an impressive ETF franchise, one of the largest ETF businesses in Canada, leading the way. What do you believe are the key drivers behind BMO's ETF success story and the differentiators in an increasingly competitive market?
Bill: Yes, it's a very competitive market. I think one of the things that have distinguished ourselves in terms of success is the breadth of our offerings and the competitive pricing thereof in our products, as well as a real focus on innovation and delivering innovative solutions to investors across the country, whether they be a do-it-yourself investor, all the way through to an institutional investor.
Valerie: Which is a perfect segue to the next topic, which I wanted to touch on with you because you were the original inventor or first here in Canada for the covered call ETF launching ZWB, a covered call ETF on the Canadian banks over a decade ago. I was wondering if you'd talk a little bit more about the breadth of covered call ETFs in the growth there.
Bill: The covered call space is very dynamic and continues to expand. The way we think about covered calls… I kind of think of it as one part of what I'll call the holy trinity of income solutions: fixed income, dividends, and covered calls. For investors in this country, particularly with an aging demographic the demand for income solutions to meet certain needs is paramount. And so, providing a breadth of solutions that do that, such as covered calls where you're getting market participation, plus some form of income or enhanced income, this is proving to be very popular.
Valerie: You mentioned institutional investors and institutions using ETFs, BMO – you're very unique in that not only are you an ETF issuer, but BMO GAM also uses ETFs as well. Can you expand on that? Again, touch on institutional usage and really how ETFs can provide scale and act as an access tool from an asset allocation perspective?
Bill: Oh, absolutely. This has been one of the key growth phenomena we have seen across multiple client channels. We have a wonderful team that we call our our multi-asset strategy team. And as the name suggests, they make decisions and they make allocations based upon a risk return profile. Could be aggressive and assertive all the way through to conservative, balanced, income oriented, whatever the case may be, and they will use the pertinent ETFs as part of that strategy, but you deliver it as one investment to the client. So that's one way that we as an institution use ETFs.
Valerie: You touched on again, the kind of competitiveness of your ETFs, the breadth of the suite, and therefore these investors can be quite tactical with their choices using BMO ETFs.
Bill: 100%. And the institutional usage of ETFs continues to expand. We saw recently the change in legislation that allows insurance companies to buy fixed income ETFs without it not being punitive, for example. The ease and execution, particularly around liquidity. For example, we see tremendous institutional flow, for example, in our Canadian banks ETF, ZEB. The kind of flows that we see are very synonymous with institutional volumes on that product and many others.
Valerie: Exactly. And it's almost like the institutional use cases continue to grow as products also proliferate.
Bill: It's an extremely quick, convenient, and very liquid way to enter and exit the market based upon your strategies.
Valerie: And you touched on it earlier, but another key channel is speaking to the direct investor, the DIY channel. Again, phenomenal growth story here. I was wondering if you could touch on that aspect as well.
Bill: It is a phenomenon. This is the fastest growing segment of the marketplace, the do-it-yourself investor, executing generally on an order entry only platform, a discount broker platform, making their own decisions vis-a-vis what they want to achieve in the marketplace. And it's up to ourselves and other issuers to provide the appropriate education and information to make informed decisions for those clients. So, it's a very exciting and very dynamic space.
Valerie: Great. And it is rapidly growing, so that doesn't mean a lot more attention, which is a good thing, but can also come with the education piece that you touched on.
Is there any one or two common misconceptions when it comes down to investing that you find yourself having to clarify?
Bill: Many people think that ETFs involve only what I'll call passive index tracking, for example, tracking the S&P 500 or the TSX 60, whatever the case may be. But the array of choice now has expanded so significantly. We have everything from actively managed ETFs, for example, in our global equity space. long-short ETFs, all the way through to commodities, for example, gold, for example.
Valerie: Absolutely, and the success of the long-short product suite has been incredible too. Again, getting these sophisticated institutional like strategies for a very competitive fee, again, democratizing that access to all investors.
Bill: 100% democratization of access to sophisticated strategies is a hallmark of the modern-day ETF array.
Valerie: Now Bill, yourself and BMO ETFs has really seen the entire ETF lifecycle here in Canada from inception through to the current growth trajectory. What trends and themes and innovations are getting you cited about the upcoming years?
Bill: The possibilities are seemingly limitless.
I think we're going to continue to see greater issuance and creation of ETFs that involve unique non-linear plays, as we call it, basically, uh, ETFs with various options, strategies embedded into them, uh, that allow investors to protect to the downside or enhance income in a different way. Or both, for example.
Uh, so this is, this is where the market is very much going in terms of next new products and the like. I would also say, uh, given everything that's going on in the marketplace, you're probably going to see a lot more strategies around, uh, how to, uh, hedge against inflationary environments, uh, and that sort of thing.
Valerie: All right, Bill, we like to finish every ETF Innovators episode with a quick rapid fire. Okay. You ready?
Bill: Yes, I'm ready. Okay.
Valerie: Dividend or covered call.
Bill: Covered call
Valerie: Europe, US or Canada?
Bill: Canada.
Valerie: What is a unique to ETF theme in the markets right now?
Bill: Gold.
Valerie: What is your favorite ETF ticker?
Bill: ZAAA
Valerie: And what is an ETF that everyone should know about?
Bill: ZESP
Valerie: Well, thank you Bill so much for joining us today.
Bill: Oh, it's been a pleasure. Thank you, Valerie.