BMO Splits Value Exposure in Asset Allocation ETFs

In a move aimed at making its asset-allocation exchange-traded funds (ETFs) more accessible to new and smaller investors, BMO Asset Management implemented three-for-one unit splits for a number of its portfolios effective August 15. The splits apply to funds including the BMO Balanced ETF (ZBAL), the BMO Growth ETF (ZGRO) and the BMO All-Equity ETF (ZEQT), among others.

As an example of the effect, ZBAL traded around $14.20 on Tuesday, August 19, after the split; the same unit had been trading above $40 the previous week. Unitholders of record on August 15 received two additional units for every unit they held on that date, preserving the overall value of their investment while reducing the price per unit.

“By lowering fees recently and by announcing these unit splits today, BMO Asset Management is delivering on its commitment to make its asset-allocation ETFs even more accessible to Canadian investors,” said Sara Petrcich, BMO’s head of ETFs and alternatives, in the firm’s announcement.

ETF	Series of units	Ticker	Unit split ratio
BMO Conservative ETF	CAD units	ZCON	3-for-1
BMO Balanced ETF	CAD units	ZBAL	3-for-1
	Fixed percentage distribution units	ZBAL.T	3-for-1
BMO Growth ETF	CAD units	ZGRO	3-for-1
	Fixed percentage distribution units	ZGRO.T	3-for-1
BMO All-Equity ETF	CAD units	ZEQT	3-for-1
BMO Monthly Income ETF†	USD units	ZMI.U	3-for-1
BMO Balanced ESG ETF	CAD units	ZESG	3-for-1

^†Canadian-dollar denominated units of ZMI did not undergo a split.

Why firms split stocks and ETFs

Unit splits are a familiar tool in capital markets. A split raises the number of units outstanding while lowering the price per unit, without changing the total market capitalization or the proportional ownership of existing investors. Companies and fund issuers often use splits to keep prices within a range that feels affordable to retail investors, to support participation in dividend reinvestment plans (DRIPs), and to improve the perceived liquidity and accessibility of a security.

In recent years, technological and market developments have also broadened access to higher-priced securities. Many online brokers now offer fractional-share trading, which enables investors to buy portions of expensive stocks or ETFs rather than whole units. Commission-free trading has encouraged buying in smaller lots, and issuers have created share or depositary receipt formats to present expensive foreign stocks at lower price points in local markets. Even so, unit splits remain a straightforward way to bring down the nominal price per unit for an entire fund series.

BMO sets a precedent for splitting asset-allocation ETFs

While unit splits have been seen across Canadian markets, BMO’s action is notable because it is the first major issuer to split the units of its asset-allocation, or “all-in-one,” ETFs. These balanced funds combine domestic and global equities with fixed-income holdings in a single product, offering broad diversification and a single investment vehicle for long-term savings goals such as retirement or taxable investing accounts.

BMO’s asset-allocation ETFs are positioned competitively on fees: they generally carry a management expense ratio (MER) of about 0.20% per year. That places them on par with some rivals and slightly below others—Vanguard’s comparable asset-allocation ETFs were introduced to Canada in 2019 and have MERs near 0.24% on average. Low management fees combined with a reduced per-unit price may increase appeal to cost-conscious retail investors.

On August 19, comparable funds were trading at different price points: Vanguard Balanced ETF Portfolio (VBAL) around $35.24, iShares Core Balanced ETF (XBAL) near $31.93, Global X Balanced Asset Allocation Class A (HBAL) about $16.67, and TD Balanced ETF Portfolio (TBAL) around $20.09. After the splits, BMO’s funds became among the most accessible by nominal unit price in this segment.

BMO appears to be betting that lower per-unit prices will attract new investors and encourage regular investing through dollar-cost averaging and other strategies, potentially growing assets over time. Whether rival issuers will respond with similar unit splits or different distribution and pricing strategies remains to be seen.

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