Fund in Focus: BMO Monthly Income Fund

FundGrade A+® Award winner

With interest rates expected to remain low for the foreseeable future, generating income continues to be a challenging task for most investors. Moving entirely to riskier parts of the bond market or switching to dividend-paying stocks both contain market risks in the current environment. Another option might be the FundGrade A+ Award-winning BMO Monthly Income Fund, which offers a bit of both.

It aims to deliver stable income while protecting capital and providing the potential for capital gains. It pays a stable $0.02 per unit monthly and will pay out any capital and other income in December. The annualized distribution yield is currently about 3.3%. The distribution is made monthly, with the most recent distribution of $0.024 made on July 16.

The fund invests in a balanced portfolio of income-generating equity securities and predominantly investment-grade bonds. For the equity sleeve, the manager uses a bottom-up fundamental investment process to identify attractively priced securities. It is overweight financial services, utilities, and real estate, with an underweight to energy and technology.

On the fixed-income side, the approach is based on the manager’s interest-rate outlook. The portfolio is somewhat neutrally positioned. Some 55% of the bond sleeve is allocated to corporate issues, with 43% in government issues.

One-year performance has been solid, gaining 2.0% to the end of June, outpacing the peer group average of 0.6%. Longer-term numbers are strong, with a 5- year average annual compounded rate of return of 4.5%. Volatility has been roughly in line with the benchmark and peer group.

Managers have done a solid job protecting capital, participating in nearly all the upside, and less than two thirds of the downside over the past five years. All things considered, this is a decent, conservative balanced offering, that is probably better suited to do-it-yourself investors.

BMO Monthly Income Fund
Fund company: BMO Investments
Fund type: Canadian Neutral Balanced
FundGrade Rating: B (June)
FundGrade A+ Awards: 2016, 2019
Style: Top-down macro, Bottom up security selection
Risk level: Low to Medium
Load status: No-load
RRSP/RRIF Suitability: Fair
Managers: BMO Management Team
MER: 1.57% (No-load)
Fund code: GGF148
Minimum investment: $500

Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.

Notes and Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently, and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice. Dave Paterson is employed as an advising representative (portfolio manager) by Empire Life Investments Inc. (ELII), a subsidiary of Empire Life Insurance Company. ELII is the investment fund manager and portfolio manager of the Empire Life Mutual Funds and the portfolio manager of the Empire Life Segregated Funds (collectively, the Empire Funds). As such, his employment and his compensation may be connected to the success of ELII and the Empire Funds. From time to time, the Empire Funds may buy, sell, hold, or otherwise have an interest in securities that may be discussed in this report.