Investing, Stock Market

ZEQT Review 2023: BMO All-Equity ETF Portfolio

ZEQT is one of the latest all-equity ETFs in Canada that was launched in 2022. If you’re looking to invest in this ETF, there is a lot you need to consider to make an informed decision out of its recency.

While all-equity ETFs are highly risky due to their extreme equity allocation, they provide the maximum capital growth. 

But can you achieve long-term capital growth with ZEQT? How does ZEQT compare with other all-equity ETFs in Canada? What do you look for when determining if ZEQT is suitable for you?

In this ZEQT review, you will find detailed information on what the ETF entails, its pros and cons, and how it compares.

ZEQT Review
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What is ZEQT?

ZEQT is the BMO All-Equity ETF Portfolio’s ticker symbol that’s traded with Canadian dollars on the Toronto Stock Exchange. The ETF was launched recently in January 2022 and it’s managed by BMO Asset Management Inc.

As one of the best all-in-one ETFs in Canada, ZEQT was launched to offer equity growth and long-term capital growth by investing in global equities. Currently, it invests 100.01% of its funds in stocks and -0.01% in cash securities.

ZEQT has $14.08 million in net assets as of October 19, 2022, with seven underlying holdings. Even though the ETF has not provided returns yet, it offered a competitive 2.54% dividend yield in its last quarterly distribution.

With a 0.18% management fee and 0.20% MER, ZEQT has average fees compared to other all-equity ETFs out there.

ZEQT Objective

As an all-equity ETF, ZEQT’s objective is to provide equity growth and capital appreciation for the long term. 

To achieve its investment objective, the ETF allocates funds across global equity securities with the majority of funds allocated to US equities. 

Bearing the high equity allocation of ZEQT, achieving its investment objective shouldn’t be a great deal in a moderate market condition.

In what follows, you will learn more about how ZEQT seeks to achieve its investment objective by also allocating funds across different sectors and markets.

ZEQT Allocations

As a part of a comprehensive strategy for achieving its investment objective, ZEQT allocates funds across different sectors and markets.

Quarterly, BMO Assets Management Inc. (the portfolio manager) rebalances ZEQT’s allocations to meet its benchmark. 

Below is the breakdown of ZEQT allocations as of October 19, 2022.

Asset Allocations

As of October 19, 2022, ZEQT allocates 100.01% of funds on stocks and -0.01% on cash and cash equivalents. The allocation is totally all-equity compared to the allocations of similar portfolios.

It’s worth noting that all-equity ETFs are easily identified by their extreme allocations to equity. In the case of ZEQT, the equity allocation is more than 100% of the funds, making it riskier.

As a result, the medium-risk rating of the ETF (by the fund manager) is not realistic if we consider the implications of its current asset allocation.

Sector Allocations

As different sectors perform differently, we can’t undermine the impact of sector allocations on any portfolio.

But in the case of ZEQT, we don’t have information on the particular sectors it allocates funds. This means that you can’t be certain about the specific industries your funds are invested in.

That’s not a problem so long as the funds are invested across industries with proven records such as financials, technology, telecommunication, industrial, consumer discretionary, healthcare, and energy.

Geographic Allocations

Geographic allocations can also impact a portfolio’s performance as different markets perform differently. Besides, the more countries a portfolio invests in, the greater exposure you can expect. 

Below are the current geographic allocations of ZEQT as of October 19, 2022. 

CountryAllocation
US45.80%
Canada25.08%
Other countries13.50%
Japan4.20%
Switzerland2.50%
UK2.50%
France2.10%
Germany1.60%

It’s not surprising that ZEQT allocates about half of its funds to the US. Similar portfolios do the same owing to the stability and proven records of American equities.

ZEQT Holdings

As a basket of funds, ZEQT invests through seven underlying holdings most of which are from the US. The underlying holdings determine both the performance and diversification of your portfolio. 

Below are the current underlying holdings of ZEQT.

ETFTicker Allocation 
BMO S&P 500 INDEX ETF ZSP43.32%
BMO S&P/TSX CAPPED COMPOSITE INDEX ETF ZCN25.52%
BMO MSCI EAFE INDEX ETF ZEA19.43%
BMO MSCI EMERGING MARKETS INDEX ETF ZEM8.04%
BMO S&P US MID CAP INDEX ETFZMID2.61%
BMO S&P US SMALL CAP INDEX ETF ZSML1.08%
CASH-0.01%

ZEQT has one of the least underlying holdings among other all-in-one ETFs in Canada. While this may not directly impact the portfolio performance, it will directly reduce your portfolio diversification.

ZEQT Portfolio Performance

Usually, ETFs with less than 1-year performance data don’t have their returns disclosed. That’s the case with ZEQT.

Even though we don’t have information about ZEQT performance at the moment, we can draw lessons from the current performance of its top underlying index as shown below:

Index ETFTicker YTD3-Years5-Years
S&P 500 Index CADZSP1.18%13.57%14.37%
S&P/TSX Capped Composite IndexZCN3.11%6.48%11.76%
MSCI EAFE Net Total Return EODZEA2.07%4.1%7.05%
MSCI Emerging Markets Index CADZEM6.96%7.16%13.76%
S&P MidCap 400® Index CADZMID5.66%
S&P SmallCap 600® Index CADZSML9.11%

Although the index returns are competitive, that’s not a guarantee that ZEQT will perform the same in the future. In other words, you should not finalize your decision based on ZEQT index returns.

If you want to stay updated about ZEQT returns, subscribe to our newsletter or leave a comment under this post.

ZEQT Dividend Yields

ZEQT pays annualized dividends quarterly to investors. As of October 14, 2022, it provided a 2.54% dividend yield. This is relatively higher than the distribution of similar portfolios.

Based on dividend yield, you can’t go wrong with ZEQT even though it has limited performance data. 

But when it comes to choosing the best all-equity portfolio, you must look beyond past dividend yield to make an informed decision.

ZEQT Fees

The management and operation of ETFs usually involve management fees and management expense ratio (MER). These fees are all available on ZEQT and they are expressed as follows: 

  • 0.18% management fee 
  • 0.20% MER 

The fees are average compared to the fees of other ETFs in Canada. But compared to mutual funds, ZEQT has low fees.

Pros and Cons of ZEQT ETF

From the above ZEQT review, we can easily identify the pros and cons of the ETF as follows:

Pros 

  • High dividend yields: The annualized dividend yields of ZEQT are more than several all-equity ETFs in Canada.
  • Low fees: With a 0.18% management fee and 0.20% MER, ZEQT is low-cost compared to similar ETFs and mutual funds.
  • Registered accounts: ZEQT is eligible for investment in registered accounts such as RRSP, RRIF, TFSA, RESP, and DPSP.

Cons 

  • Limited holdings: ZEQT has only seven underlying holdings six of which are index funds and one cash. This is low compared to the holdings of similar portfolios. The limited holdings will also lower the level of portfolio diversification.
  • Aggressive allocation: With 100.01% stock allocation, you should expect a higher risk on ZEQT than on other all-equity ETFs. However, this aggressive stock allocation could translate to greater capital growth.
  • Limited data: With less than 1-year portfolio data, ZEQT has little information to evaluate. This is a great source of worry as we don’t have an idea of how the ETF will perform in the future.

How to Invest in ZEQT 

The method you choose to invest in ZEQT will depend on your investment skills and time commitment.

If you have the investment skills and time to invest in ZEQT yourself, you should sign-up with one of the best discount brokerages in Canada (e.g Wealthsimple Trade).

After signing up with a brokerage, you can follow the steps below to invest in ZEQT:

  • Log in to your brokerage account 
  • Fund your account (there’s no minimum balance required on Wealthsimple Trade)
  • Enter ZEQT under the search box
  • Click on the ETF
  • Enter the amount of ZEQT you want to buy
  • Click the “Buy” icon
  • Review and place your order

But if you don’t have the investment skills or time, you have two options for investing in ZEQT. These are:

  • Robo-Advisor: This is an automated investment platform that handles the entire investing process on your behalf. Yours is just to provide your personal details and funds. In exchange for the automated service, you will be required to pay an annual management fee and MER which are determined by your investment amount. Questwealth Portfolios ranks among the best robo-advisors in Canada due to its low management fees and MERs.
  • Financial Advisor: You can also invest in ZEQT through your financial advisor if you don’t have the investment skills and time. Like a robo-advisor, your financial advisor can handle the entire investing process on your behalf. Although a financial advisor may be more costly than a robo-advisor, the result may be more risk-saving. 

How ZEQT Compares

Before ZEQT, we already had a few all-equity ETFs in Canada. As of today, investors with above-average risk tolerance have different opinions of all-equity ETFs to choose from.

In what follows, we are going to look at how ZEQT compares with similar all-equity ETFs in Canada.

ZEQT vs VEQT

ProfileZEQTVEQT
Inception dateJanuary 17, 2022January 29, 2019
Portfolio managerBMO Assets Management Inc.Vanguard Investments Canada Inc.
ExchangeToronto Stock Exchange Toronto Stock Exchange 
Underlying holdings713,728
Management fee0.18%0.22%
MER0.20%0.24%
Average annual returns since inception+6.84%
Dividend yield2.54%1.68%
Dividend distribution frequencyQuarterlyAnnually
Risk levelMediumMedium
Eligibility for registered accountsYesN/A

VEQT is the ticker symbol of the Vanguard All-Equity ETF Portfolio that’s also traded on the Toronto Stock Exchange.

Launched in 2019, VEQT also invests more in equity in order to provide long-term capital growth. But as a term of writing, VEQT has the following allocations: 

  • 99.88% on stocks 
  • 0.12% on short-term reserves

With over 13,000 underlying holdings, VEQT was able to offer the following returns to investors as of September 30, 2022:

  • -11.78% as a 1-year return
  • +5.38% as a 3-year return
  • +6.84% return since inception

Compared to ZEQT, VEQT provided a relatively lower dividend yield in the last distribution. Nevertheless, VEQT has enough data for us to evaluate. 

The major drawback of VEQT is that it has higher management fees and MERs with no access to registered accounts.

ZEQT vs XEQT

ProfileZEQTXEQT
Inception dateJanuary 17, 2022August 7, 2019
Portfolio managerBMO Assets Management Inc.BlackRock Canada
ExchangeToronto Stock Exchange Toronto Stock Exchange 
Underlying holdings79363
Management fee0.18%0.18%
MER0.20%0.20%
Average annual returns since inception5.86%
Dividend yield2.54%1.28%
Dividend distribution frequencyQuarterlyQuarterly
Risk levelMediumLow to medium
Eligibility for registered accountsYesYes

XEQT, the ticker symbol of the iShares Core Equity ETF Portfolio, is also 3-year older than ZEQT. The ETF has the same fee structure as ZEQT, the same distribution schedule and it’s also eligible for registered accounts.

However, XEQT has a low-medium risk level compared to ZEQT as it invests 99.65% of its funds in equity and 0.35% in cash/derivatives.

Since XEQT has been around since 2019, we have enough data to judge its performance. As of September 30, 2022, the ETF has the following returns:

  • -12.46% as a 1-year  return
  • 5.21% as a 3-year return
  • -5.86% return since inception

In addition, XEQT provides more diversification than ZEQT due to its 9000+ underlying holdings.

The major drawback of XEQT lies in its low dividend yields, especially on the last distribution.

ZEQT vs FEQT

ProfileZEQTFEQT
Inception dateJanuary 17, 2022January 20, 2022
Portfolio managerBMO Assets Management Inc.Fidelity Investments Canada ULC
ExchangeToronto Stock Exchange NEO Exchange
Underlying holdings7649
Management fee0.18%Variable
MER0.20%0.41%
Average annual returns since inception
Dividend yield2.54%
Dividend distribution frequencyQuarterlyAnnually
Risk levelMediumMedium
Eligibility for registered accountsYesN/A

FEQT, the ticker symbol of Fidelity All-in-One Equity ETF, is three days younger than ZEQT which was also launched in January 2022. The ETF not only provides exposure to equities but to cryptocurrencies as well. 

Like ZEQT, FEQT has not provided returns yet. And since its dividends are distributed annually, we can’t also access information about the ETF dividend yield at the moment.

One thing that makes FEQT unique is that it allocates 97% of its funds to equity and 3% to cryptocurrencies. This could translate to high returns with higher risk. 

Compared to ZEQT MER, FEQT has a high management expense ratio as shown above. You should also note that ZEQT is traded on the TSX exchange while FEQT is traded on the NEO Exchange.

Which All-Equity ETF to Choose?

No doubt, ZEQT came with unique features that compete with the existing all-equity ETFs in Canada. 

From the above comparison, you can see how the ETF competes significantly in terms of dividend yields and fees. But are these enough reasons to invest in ZEQT? Certainly no!

As a new ETF with limited data, you shouldn’t rush investing in ZEQT without having a thoughtful consideration of your risk tolerance and the ETF facts. 

So when deciding on which all-equity ETF to invest in, you need to have a comprehensive view to avoid costly mistakes.

By taking a comprehensive view, you will understand your financial situation, risk tolerance, and investment objective. With this, you can easily decide on which all-equity fund to invest in based on the ETF:

  • Assets allocation and holdings
  • Management fee and MER
  • Dividend yield
  • Portfolio performance

With this, you can easily determine which of the above all-equity ETFs to go with. Once you take a comprehensive view, you can’t make the wrong choice.  

The Bottom Line on ZEQT Review

All-equity ETFs regardless of their age pose a high degree of risk compared to other all-in-one ETFs. However, investing in a new ETF like ZEQT requires careful consideration as there’s little data to evaluate.

While my ZEQT review is positive, I recommend you take a comprehensive view before finalizing your decision. Also, you shouldn’t finalize your decision based on this information alone as we’re not liable for the outcome of your investment. Learn more about our disclosure here.

If you’re still not sure which all-equity ETF to invest in, you should contact your financial advisor for direction. Feel free to drop your concerns or questions in the comment section.

For more related information, visit our blog section or check out the following articles: 

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About John Adebisi

John Adebisi is a CPA, FCCA and MBA holder with a Bachelor's degree in Accounting & Finance. He has over a decade of experience in writing personal and business finance content for audiences across North America, Europe, the UK and Africa. In addition to his writing experience, he also has a strong background in financial research and analysis, giving him a unique perspective of the financial markets. John derives pleasure in helping people make smart financial decisions, and he believes that knowledge and experience can be valuable resources for anyone who wants to learn how to manage their money.

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