I glanced over what I initially thought was a rather innocuous press release on Wednesday. BMO Investments Inc. wants to change the names of some of its index mutual funds to include “ETF” in the new official names. It wants to change the BMO Equity Index Fund, the BMO International Index Fund and the BMO U.S. Equity Index Fund to the BMO Canadian Equity ETF Fund, the BMO International ETF Fund, and the BMO U.S. Equity ETF Fund, respectively.
I’m not a fan of this idea.
To me, this seems like a marketing exercise to capitalize on the growing favourable press of exchange-traded funds (ETFs). These are still going to be mutual funds. There are differences between traditional exchange traded funds and traditional open-ended mutual fund unit trusts.
Here’s an analogy. When travel via planes started to take off (pun totally intended), train companies suffered. What BMO is doing would be like a train company saying, “hey let’s call our Toronto to Montreal train route the ‘Toronto to Montreal Flight'”. It just adds confusion to an industry when that’s the last thing we need.
I will point out that there are other changes planned beyond a simple name change. They would like to change the investment objectives so that the goal is to replicate the performance of ETFs that invest primarily in equities of the appropriate mandates, and can achieve this by either investing directly in ETFs, holding the underlying individual constituents directly, and/or using derivatives for the purpose of minimizing tracking error to the underlying ETFs (and note, not the ETFs’ benchmark indices). It’s only my opinion, but the changes in the investment objectives do not warrant the addition of “ETF” to the fund names.
You can read the press release here.