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  5. ZWU: Can you compare these please. [BMO Covered Call Utilities ETF]
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Investment Q&A

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Q: Can you compare these please. umax distribution is much higher and is not leveraged, fewer holdings but includes railroads

Is zwu leveraged, and what does "leaverage" mean

Can't find umax mer

Thank you as always
Asked by JACK on August 11, 2023
5i Research Answer:

UMAX will not disclose MER until it has been in operation a longer period of time. The management fee is 0.65% so we would expect an MER in the 0.82% range. It uses a covered call strategy to boost yield, but writes 'in the money' calls instead of 'out of the money' calls. This raises its call premium income but can limit its upside potential as positions will get called away earlier in a rising market. UMAX focuses on utilities, pipelines, telecoms and railways, while ZWU is utilities only. ZWU is much larger at $1.7B and fees are 0.71%. It is down 0.67% in a month and UMAX is down 0.92% (one month is the only performance period available for UMAX. ZWU is not leveraged. Leverage means that the ETF borrows money to buy more securities, similar to a margin account. Most leveraged ETFs have a debt cap at 25% or 30%. Leverage can enhance returns but can also amplify losses in a downturn.  

Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWU.