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BMO Covered Call Dow Jones Industrial Average Hedged to CAD ETF (ZWA)
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Hamilton Enhanced U.S. Covered Call ETF (HYLD)
Q: I own ZWA.TO and it has drastically underperformed anything close to the benchmark dow. IYY, a Dow proxy listed in USD, is up 34% in past year while ZWA is up less than 10% on a price basis. Being a covered call ETF, yielding less than 6%, does not explain this huge %-point performance difference. Nor the fact that it is CAD-hedged. How can it be so poorly managed? What is going on with these BMO etfs? Can you recommend a broad CAD denominated global equity covered call ETF so I can replace ZWA?
5i Research Answer:
It is a big performance gap. But we would note the Canadian dollar declined nearly 9% last year so that explains at least some of the gap. Fees of 0.72% are also 0.50% higher. Bloomberg shows that 48% of the fund is 'cash'. This may be related to derivatives but certainly if managers are holding more cash then the performance would have lagged last year. Other than that point its holdings are essentially the same as IYY. We did not watch call option premiums on the Dow all year but it does tend to be a less volatile index. HYLD may be of interest, but it does use 25% leverage. But one-year is 28.45% and yield is 12.41%. The combination of Canadian listed and global reduces choice significantly.