BMO Global Asset Management Continues "Investor Focus"

CHICAGO, IL--(Marketwired - Jul 24, 2013) - BMO Global Asset Management recently released its latest in a series of financial advisor-focused articles entitled, Preparing for rising interest rates: Bond Ladder vs. Bond Fund Ladder . The "Investor Focus" paper addresses the challenge fixed income investors are currently facing -- trying to generate income while also protecting themselves from bond price declines as yields creep higher.

As the paper acknowledges, large, conservative investors have historically constructed a laddered bond portfolio to address this problem. However, this tactic has drawbacks. Most notably, constructing an adequately diversified laddered portfolio of bonds requires a significant investment and is therefore not a feasible solution for most investors. In addition, if money is unexpectedly needed from the account, investors with laddered bond portfolios become exposed to market risk, which is what the laddered strategy is supposed to protect against.

According to BMO Global Asset Management, there may be a better, more flexible solution for conservative investors seeking to protect their principle against rising rates -- fund laddering. This strategy not only may provide downside protection like a laddered bond portfolio, it may also provide a higher level of diversification and the potential for higher yields without increasing the riskiness of the overall portfolio.

"Investors are very concerned about how their portfolios will be affected as interest rates continue to climb," said Duane McAllister, Tax-Exempt Portfolio Manager, BMO Global Asset Management. "With a laddered fund portfolio, we can help our clients protect themselves from the bond price declines that are synonymous with interest rate increases while still generating the income they need. With this strategy, we are looking for a balance between stability and yield, regardless of market conditions."

To illustrate the advantages of a fund-based portfolio, BMO Global Asset Management constructed a hypothetical portfolio using the BMO Ultra Short Tax-Free Fund, the BMO Short Tax-Free Fund and the BMO Intermediate Tax-Free Fund. Relative to an equally-weighted bond ladder, the fund laddered delivered:

1. Greater Diversification - providing shareholders with investments in more than 1,000 individual bonds while limiting exposure to any one credit to less than 1%. 2. Higher Average Yield - with comparable levels of interest rate risk, the fund-based portfolios delivered higher yields. 3. Floating Rate Exposure - the underlying investments in the fund ladder may be free to invest in issues that reset rates at least annually. 4. Liquidity - fund ladder investors have daily liquidity at the end of each business day at the closing net asset value (NAV).

According to McAllister, "Investors may need to think differently as they prepare their fixed income portfolios for the future. A fund ladder may be the best approach in what we see as a stable-to-raising interest rate environment."

For more information, visit http://www.bmo.com/gamus . For a copy of this article, click on "Preparing for rising interest rates: Bond Ladder vs. Bond Fund Ladder" under Investment Perspectives.

About BMO Global Asset Management BMO Global Asset Management is a global investment manager with more than $125 billion in assets under management as of April 30, 2013, including discretionary and non-discretionary assets under management.

Our two multi-disciplined teams are based in Toronto and Chicago/Milwaukee, and our network of world-class boutique managers is strategically located across the globe. They include Monegy, Inc., Pyrford International Ltd., Lloyd George Management and Taplin, Canida & Habacht, LLC. BMO Global Asset Management delivers service excellence from offices throughout North America, and in London, Abu Dhabi, Mumbai, Beijing, Shanghai and Hong Kong. Our approach has led us to be recognized by Pension & Investments as one of the world's largest 100 asset managers based on combined assets under management as of December 31, 2012.

We are a part of BMO Financial Group ( NYSE : BMO ), a fully diversified financial services organization with $555 billion total assets and more than 46,000 employees as of April 30, 2013.

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