Key Morningstar Metrics for BMO MSCI EAFE Hdgd to CAD ETF
- MER: 0.22%
- Morningstar Category: International Equity
- Morningstar Medalist Rating: Silver
- Morningstar Rating: ★★★★
BMO MSCI EAFE funds provide market-cap-weighted portfolios of large- and mid-cap stocks in the developed international market. Their representative portfolios and low turnover make them compelling options.
The funds track the MSCI EAFE Index. It targets large- and mid-cap stocks from 21 overseas developed markets, encompassing 85% of the investable market. The index weights its holdings by market capitalization. Market cap weighting is an efficient way to size holdings because it harnesses the market’s consensus opinion of each stock’s relative value. Stocks that perform well take up a larger share of the portfolio, while shrinking companies that may be struggling will have less importance.
Diversification is a strength of this strategy. The index holds about 700 names as of September 2025, and that figure has been trending lower in recent years. The index’s 10 largest positions usually account for less than 15% of the portfolio. The strategy is not as broad as other index-tracking funds that include the small-cap segment, but it still covers a lot of ground and reasonably represents the opportunity set available to active managers. Sector and country allocations approximate the average fund in the international equity category.
The index does not include emerging-market and small-cap stocks, so it is not positioned to reap the rewards should they perform well. However, the impact on category-relative performance should not be huge. Taken together, they usually constitute around less than 10% of competitor portfolios in the international equity category. Middling performance in those segments gave these funds a small leg up on competitors in recent years.
This strategy is shared among several ETFs and mutual funds. ETFs tend to have lower fees than mutual funds, and this holds true with BMO MSCI EAFE funds. ETF fees usually rank in the cheapest quartile. Their mutual fund counterparts, however, have higher fees depending on the share class. Some rank in the cheapest quartile, while others land in more expensive quartiles. Investors should be aware of fees as they will have a direct impact on category-relative performance.
BMO MSCI EAFE Hedged to CAD ETF: Performance Highlights
The MSCI EAFE Index outperformed the international equity category average by 1.27 percentage points annualized over the last 10 years through September 2025.
These funds captured most of that total return with fee differences explaining most of the variation in performance between share classes. Overall, the strategy’s share classes were less expensive than most peers in their category, but cheaper funds fared better. The index was modestly more volatile than the category norm, but not enough to compromise its risk-adjusted return edge.
While lower fees provide a durable advantage, country and regional allocations can drive category-relative performance from time to time. For example, the funds’ hefty allocations to Japanese stocks hurt performance in 2021 and 2022. Over the long term, though, low fees should provide an advantage.
Some funds tracking this index hedge away currency risk. Hedging isn’t free, and the advantages and disadvantages of currency hedging come in waves. The impact of foreign exchange rates on total return tends to wash out over the long run.
