BMO Asset Management has made a change to the underlying index of the BMO Emerging Markets Bond Hedged to CAD Index ETF (ZEF).
The investment objective of ZEF is to seek to replicate, to the extent possible, the performance of an emerging markets bond index, net of expenses. Currently, ZEF seeks to replicate the performance of the Barclays Emerging Markets Tradable USD Sovereign Bond Index CAD Hedged. Effective on or about 1 June, 2015, ZEF will seek to replicate the performance of the Barclays Emerging Markets Tradable External Debt (EMTED) GDP Weighted Capped Index CAD Hedged. An amendment to the offering documents of ZEF has been filed with the securities regulatory authorities, for which a receipt has been issued.
The Barclays Emerging Markets Tradable External Debt (EMTED) GDP Weighted Capped Index CAD Hedged is a widely-recognised index that will provide investors with substantially the same exposure to the asset class to which ZEF is currently exposed.
The ZEF Index Change is intended to provide investors of ZEF with exposure to a more diversified and liquid index, and to align more closely with ZEF's investment objectives and strategies. Currently, constituent securities for the Barclays Emerging Markets Tradable USD Sovereign Bond Index CAD Hedged are selected on the basis of one bond per emerging market country. Following the ZEF Index Change, constituent securities for the Barclays Emerging Markets Tradable External Debt (EMTED) GDP Weighted Capped Index CAD Hedged will be selected on the basis of up to three bonds per emerging market country. It is expected that this change may increase overall liquidity and reduce security specific risk (increase diversification) within ZEF's investment portfolio. Constituent securities for the Barclays Emerging Markets Tradable External Debt (EMTED) GDP Weighted Capped Index CAD Hedged will have a term to maturity of between 18 months and no more than 10 years. Similar to the current underlying index, the Barclays Emerging Markets Tradable External Debt (EMTED) GDP Weighted Capped Index CAD Hedged will retain the gross domestic product country weighting methodology.
The ZEF Index Change is intended to align with developments in the emerging markets bonds sector. As the underlying market continues to evolve with more diversified issuance, and as investor demand in ZEF continues to grow, it is intended that the Barclays Emerging Markets Tradable External Debt (EMTED) GDP Weighted Capped Index CAD Hedged will better reflect the investable universe of emerging markets bonds.
