BMO Strategic Equity Yield Fund

Q: What is convergence investing?

Convergence investing is a new generation of investment strategies, providing access to sophisticated strategies previously only available to Capital Markets clients. Convergence aims to level the playing field so that all Canadian investors can focus on structured outcomes rather than beating the benchmark.

The Missing Piece Between Equities and Fixed Income

Introducing the BMO Strategic Equity Yield Fund from our new Convergence investing suite—a unique offering that replicates an exposure of structured notes to complement your traditional balanced portfolio.

Reach for yield. Not risk.

That age-old problem – you need higher income to fulfill your investment goals, yet are sensitive to market volatility. Our solution: Convergence investing.

Higher level of monthly cash flow*

Low to Medium Risk Rating

* As compared to traditional Fixed Income investments. Source: Halo Investing, “Structured Notes 101 – Infographic,” Halo Journal, August 31, 2022.

Convergence investing, explained.

Convergence investing aims to democratize access to capital markets solutions. Our mission is to provide investors with sophisticated, defined-outcome investment tools in the format of a traditional mutual fund.

Our core offering, the BMO Strategic Equity Yield Fund, brings the power of structured notes through replication in a managed solution.*

* The BMO Strategic Equity Yield Fund will focus on replicating exposure to notes focused on income generation, while also maintaining contingent downside protection. Our dedicated team of structured product professionals seeks to achieve above market returns and exposure to North American and/or global equity markets through the use of derivatives and/or structured products.

What are structured notes?

Structured notes are hybrid investments engineered to achieve a specific investment outcome. With the BMO Strategic Equity Yield Fund, the goal is to replicate an exposure that blends the properties of equities and fixed income. To land somewhere in the middle, offering higher potential returns than a standard bond fund with a risk rating* lower than the usual basket of stocks.

Right in the sweet spot.

Risk is defined as the uncertainty of return and the potential for capital loss in your investments

Fund investment strategy

Broadly speaking, structured notes fall on a spectrum between income and growth.

The BMO Strategic Equity Yield Fund aims to replicate exposure to notes focused on income generation, while also maintaining contingent downside protection. Our dedicated team of structured product professionals seeks to achieve above market returns and exposure to North American and/or global equity markets through the use of derivatives and/or structured products.

The secret sauce: auto-callable notes.

Top-down fundamental research

Macroeconomic trends, Central Bank Policies, Interest Rate Forecasts.

Bottom-up Analysis

Financial Statement Analysis, Security Screening (i.e Volatility and Dividend Sustainability)

Active Portfolio management

Technical Indicators, Derivative Hedging, Value-at-risk Analysis

For illustrative purposes only.

Canada’s wealthiest investors have used structured notes for decades.¹ Now you can, too.

The process of managing a portfolio of structured notes can be expensive and time-consuming. Hundreds of hours may be spent analyzing strike prices, yields, risk barriers and buffers.

The BMO Strategic Equity Yield Fund makes it simple and stress-free to replicate that exposure, putting a whole new asset class within your reach.

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BMO GAM is the first Canadian asset manager with a dedicated structured products team.

We have established the first in-house division for Convergence investing in Canada. Our team is composed of highly tenured experts with a combined 100+ years of experience in capital markets. Led by BMO Global Asset Management CEO Bill Bamber and Head of Synthetic Asset Management, Sara Petrcich, the specialized group will continue to build defined-outcome investment products that enhance traditional asset allocation.

Sara Petrcich

Head of ETF & Structured Solutions

Sara Petrcich has over 20 years of Capital Markets experience as well as one and a half years in the Bank doing a secondment for the CFO and Treasurer at one of Canada’s largest banks. Her experience has been predominantly as a derivatives trader in structured and exotic products including commodities, equities, rates and credit. She has an exceptionally strong risk management background as a result. At BMO Global Markets she was head of Risk Strategy, reporting into the head of Global Markets as their exclusive and trusted risk advisor. She oversaw the entire portfolio of trading book risk across the Capital Markets businesses as well as the associated risk metrics governing the businesses. She was responsible for implementing macro hedges to manage tail risk and optimize Capital Market’s risk taking capabilities vis a vis customer activities as well as managing regulatory metrics impacting the businesses’ balance sheet. She was appointed as Managing Director and Head of Synthetic Asset Management in August 2022 where she led the build out and creation of synthetic funds and products within BMO Global Asset Management (BMO GAM). Sara leads the ETF & Structured Solutions team, which subsequently came from the combination of the ETF and Synthetic Asset management businesses. Sara is also responsible for building out a macro hedging framework for the CEO of BMO GAM and Head of Wealth. She is currently on the PineBridge Risk Committee and the Executive BMO GAM sponsor for Diversity, Equity, and Inclusion (DE&I).

Bill Bamber, CFA

Chief Executive Officer

Bill Bamber joined BMO Wealth Management in April 2022 as Head of Synthetic Asset Management and is currently the CEO of BMO Global Asset Management. Bill has more than 30 years of experience in the Financial Services Industry, including extensive experience in International Capital Markets, most notably in exotic derivatives spanning all asset classes as well as global structuring and structured products.

Prior to joining BMO, Bill oversaw Structured Products and Quantitative Investment Strategy businesses globally and led many ground-breaking initiatives and innovative indices. He has held senior positions at International and North American financial institutions including a focus on equity derivative structuring in the Americas.

Bill is well-known as an innovator in the investment industry with an outstanding track record for product firsts around the world. This includes pioneering the world’s first Emerging Market ETF (STX40 SJ Equity) and creating the first MLP-linked security both inside (AMJ US Equity) and outside of the U.S. He was also the first to create a listed trading platform for zero-coupon South African gilts.

Bill is a Chartered Financial Analyst (CFA) and holds both a Master of Management Analytics and a Master of Business Administration from Queen’s University.

Get the Final Puzzle Piece – Invest with BMO GAM

Markets are evolving fast—and investors need every tool available to meet their investment outcomes. Download the reference documents below to assist you.

Invest with us

If you are an investor, you can speak to your financial advisor, or email us directly.

If you are an advisor, please contact your BMO wholesaler.

Strategic Equity Yield Fund FAQs

What are the benefits of the BMO Strategic Equity Yield Fund?

There are several benefits to the BMO Strategic Equity Yield Fund. These include:

Monthly cash flow
Diversification across different geographies and sectors
Experienced management team made up of professionals with capital markets and wealth management backgrounds
Time savings for investors as actively managing a large portfolio of notes is labour intensive when you have to do it yourself
Global exposure that is currency hedged
Contingent principal protection if the note is not called prior to maturity. The Strategic Equity Yield Fund focuses on providing buffered downside protection
Minimum initial investment of $500 with subsequent contributions of $50
Increased accessibility. These products have historically only been offered to capital markets clients and now through a familiar 81-102 fund format, we are expanding that access to all Canadian investors.

What is an autocallable coupon note?

Autocallable notes are enhanced yield strategies that provide investors the potential to receive an above-market coupon based on the performance of an underlying reference asset. These notes also provide contingent downside protection. They have three main components: call feature, contingent coupon and contingent principal protection:

Call feature. The notes will be automatically called (mature) at a pre-determined call date if the underlying reference asset’s level meets or exceeds the autocall level
Contingent coupon. A coupon is paid if, on a pre-determined coupon observation date, the underlying reference asset meets or exceeds the coupon threshold
Contingent principal protection. If the note is not called prior to maturity, the initial principal is protected if the underlying reference asset’s level is at or above the protection level at maturity

What is a structured note?

Structured notes are hybrid investments designed to provide investors a pre-determined investment outcome. With the BMO Strategic Equity Yield Fund, the goal is to replicate an exposure that blends the properties of equities and fixed income. The BMO Strategic Equity Yield Fund offers higher potential returns than a standard bond fund with a risk rating that is generally equal to or lower than a basket of equities

What is convergence investing?

¹Halo Investing, “Structured Notes 101 –Infographic,” Halo Journal, August 31, 2022.↩

²As compared to traditional Fixed Income investments. Source: Halo Investing, “Structured Notes 101 – Infographic,” Halo Journal, August 31, 2022.↩

Disclosures

Commissions, trailing commissions (if applicable), management fees and expenses all may be associated with mutual fund investments. Please read the fund facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Distributions are not guaranteed and are subject to change and/or elimination.

For a summary of the risks of an investment in BMO Mutual Funds, please see the specific risks set out in the prospectus.

BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.

Distributions are not guaranteed and may fluctuate. Distribution rates may change without notice (up or down) depending on market conditions. The payment of distributions should not be confused with an investment fund’s performance, rate of return or yield. If distributions paid by an investment fund are greater than the performance of the fund, your original investment will shrink. Distributions paid as a result of capital gains realized by an investment fund, and income and dividends earned by an investment fund, are taxable in your hands in the year they are paid. Your adjusted cost base will be reduced by the amount of any returns of capital. If your adjusted cost base goes below zero, you will have to pay capital gains tax on the amount below zero. Please refer to the distribution policy for BMO Mutual Fund set out in the prospectus.

Distributions, if any, for all series of securities of a BMO Mutual Fund (other than ETF Series) are automatically reinvested in additional securities of the same series of the applicable BMO Mutual Fund, unless the securityholder elects in writing that that they prefer to receive cash distributions. For ETF Series securities of a BMO Mutual Fund, distributions, if any, may be paid in cash or reinvested automatically in additional ETF Series securities of the applicable BMO Mutual Fund and the ETF Series securities will be immediately consolidated such that the number of outstanding ETF Series securities following the distribution will equal the number of ETF Series securities outstanding prior to the distribution. If a securityholder is enrolled in a distribution reinvestment plan, distributions, if any, will be automatically reinvested in additional ETF Series securities of the applicable BMO Mutual Fund pursuant to the distribution reinvestment plan. For further information, see the distribution policy for the applicable BMO Mutual Fund in the simplified prospectus.

This communication is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Particular investments and/or trading strategies should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

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