Diversify Beyond Stocks and Bonds with the BMO Broad Commodity ETF (ZCOM)

This piece is Sponsored by BMO Exchange Traded Funds.

Many Canadian investors have embraced BMO’s all-in-one asset allocation ETFs. These one-ticket solutions package together stocks and bonds in a single fund, with allocations ranging from aggressive 100% equity portfolios to more conservative mixes such as 80/20, 60/40, 40/60, and even 20/80.¹

For a relatively low fee, investors get instant diversification, automatic rebalancing, and a portfolio designed to match different risk profiles^* and time horizons. Instead of worrying about individual holdings or constantly adjusting allocations, investors can simply buy one ETF and let it do the work.

For the most part, this approach has worked well. But 2022 exposed one weakness. That year, investors experienced a combination of rising interest rates and elevated inflation.

Stocks struggled as higher borrowing costs pressured valuations. Bonds, which are typically expected to provide stability when equities fall, also suffered losses as yields moved higher.

When both parts of the portfolio are under pressure at the same time, diversification becomes more important than ever. One solution is to add a third asset class that behaves differently from traditional stocks and bonds.

Ideally, you’re looking for something that may respond positively when inflation rises, supply chains tighten, or economic conditions create challenges for financial assets.

Commodities have historically played that role. And historically, getting exposure to these commodities was fairly difficult. Futures contracts, for example, are an avenue that most didn’t want to go down.

But, this isn’t the case anymore. In my opinion, getting exposure to a wide variety of commodities has never been easier. It’s gone from having to understand and navigate the complex futures market to a simple click of a button.

One of the more popular commodities ETFs isthe BMO Gold Bullion ETF (ZGLD)⁷, since it’s launch in March 2022 For a 0.22% management expense ratio⁸, investors receive exposure to spot gold prices backed by unencumbered physical gold bullion held in London Good Delivery bars⁹.

But gold is only one corner of a very broad commodity universe.  I managed to come across the BMO Broad Commodity ETF (ZCOM)⁹. This is a newer fund in BMO’s lineup, and in this article I’m going to walk you through what it is, and how it could potentially fit in your portfolio.

What is ZCOM?

While storing gold bullion is relatively straightforward, it becomes far more complicated when dealing with assets like crude oil, natural gas, corn, wheat, cattle, or coffee.

Instead, as I mentioned, commodity exposure is typically obtained through futures contracts, which are agreements to buy or sell a commodity at a predetermined price on a future date. Futures markets have long been the preferred way for investors and commercial users to gain exposure to commodity prices without taking physical delivery of the underlying assets.

ZCOM is a passive ETF that tracks the Bloomberg Commodity Index Total Return⁴, one of the most widely followed commodity benchmarks in the world. In terms of sector exposure, the Bloomberg Commodity Index currently gets you exposure to five major commodity groups:

1. Energy: Brent crude oil, WTI crude oil, natural gas, low sulphur gas oil, ULS diesel, RBOB gasoline.
2. Agriculture: Soybeans, corn, soybean oil, soybean meal, Chicago wheat, Kansas City wheat, sugar, coffee, cotton, cocoa.
3. Industrial Metals: COMEX copper, aluminum, zinc, nickel, lead.
4. Precious Metals: Gold, silver.
5. Livestock: Live cattle, lean hogs.

One important thing to understand is that the Bloomberg Commodity Index is not static. The sector weights and commodity allocations can change over time based on the index methodology and underlying market conditions. As a result, investors receive exposure to a diversified basket of commodities rather than making a concentrated bet on any single resource.

To efficiently track the Bloomberg Commodity Index Total return, ZCOM uses total return swaps with approved counterparties. The ETF posts collateral and exchanges the return of that collateral for the return of the benchmark.

The collateral currently consists primarily of holdings such as the BMO Ultra Short-Term US Bond ETF (ZUS.U) and other high-quality fixed-income securities.

This structure allows investors to gain broad commodity exposure in a cost-efficient manner without the complexities associated with holding physical commodities or managing futures contracts.

Why Consider ZCOM?

Cost has historically been a hurdle. Commodity ETFs have often carried relatively high management expense ratios (MERs) owing to their complexity. Since fees are deducted from fund assets, higher costs can reduce total returns over time.

ZCOM is competitively priced. With an estimated MER of just 0.30%¹¹, it ranks among the lower-cost broad commodity solutions available to Canadian investors⁵. A $10,000 investment would incur approximately $30 per year in fee drag.

This is a price I am more than willing to pay, especially considering for the vast majority of my investing career, getting access to these commodities was exponentially harder than it is with ZCOM.

Another consideration is currency exposure. The underlying Bloomberg Commodity Index Total Return is denominated in U.S. dollars, while ZCOM trades in Canadian dollars. As a result, movements between the U.S. and Canadian dollar can affect returns.

A strengthening U.S. dollar may boost returns for Canadian investors, while a strengthening Canadian dollar may have the opposite effect.

Investors who prefer to reduce this currency exposure can consider ZCOM.F, the currency-hedged version of the ETF. ZCOM.F carries a similarly competitive 0.29% management expense ratio¹², but uses currency hedging to reduce the impact of exchange-rate fluctuations.

Beyond cost and currency, there is a longer-term demand story worth understanding, and in my opinion it is one of the more interesting reasons to look at broad commodity exposure today. That story is artificial intelligence.

AI is usually framed as a software and semiconductor theme, but the infrastructure underneath it is surprisingly commodity-intensive. The data centers that train and run AI models consume large amounts of electricity and are built with significant quantities of metals.

Copper runs through their electrical wiring, power distribution, and cooling systems. Aluminum and other industrial metals are used throughout construction. And in much of North America, the electricity that powers these facilities still relies heavily on natural gas.

Each of those commodities is represented in the Bloomberg Commodity Index Total Return that ZCOM tracks. Based on the index’s 2026 target weights, natural gas accounts for roughly 7.2%, copper roughly 6.4%, and industrial metals as a group roughly 15.8%, alongside sizable weightings in broader energy and precious metals.

An investor in ZCOM therefore already holds exposure to several of the physical inputs the AI build-out depends on, without having to choose a single commodity or take on the company-specific risk of an individual miner or energy producer.

I want to make something clear though. Commodity prices are driven by many factors, including global growth, supply and production levels, weather, geopolitics, and currency movements, and AI-related demand is only one input among them.

There is no guarantee that rising computing demand will translate into higher commodity prices or positive returns, and commodities can be volatile over shorter periods. 

But, it’s an interesting theme nonetheless.

How Can Investors Use ZCOM?

ZCOM can play different roles depending on an investor’s objectives. For shorter-term traders, it may be used as a way to express a bullish view on commodity prices during periods of inflation, supply disruptions, or geopolitical conflict.

For long-term investors, ZCOM may serve as a complementary allocation alongside stocks and bonds. One of the key attractions of commodities is that they have historically behaved differently from traditional financial assets during certain market environments. As a result, adding commodities to a portfolio may provide a third source of diversification beyond equities and fixed income⁶.

In that role, ZCOM can help investors build portfolios that are less dependent on the performance of stocks and bonds alone, particularly during periods when inflation or commodity prices become dominant drivers of market returns.

*One’s risk profile is comprised of risk tolerance (i.e., willingness to accept risk) and risk capacity (i.e., ability to endure potential financial loss).

1. https://bmogam.com/ca-en/products/exchange-traded-funds/asset-allocation-etfs/
2. https://www.sciencedirect.com/science/article/pii/S1042443125001325
3. https://www.bmoetfs.ca/articles/commodities-a-strategic-shield-against-new-regime-risks
4. https://www.bloomberg.com/professional/products/indices/quote/BCOMTR:IND
5. https://etfmarket.cboe.com/canada/en/etf-screener?ac=c&s=expense_ratio%20asc
6. https://www.investopedia.com/articles/trading/05/021605.asp
7. Launched in 2024, the fund has grown to approximately $2.0 billion in net assets, reflecting strong investor demand for physical gold exposure.
8. Management expense ratio, MER, as of Dec. 31, 2025
9. London Good Delivery (LGD) bars are large, high-purity gold or silver bars meeting London Bullion Market Association (LBMA) standards, widely used in international bullion trading and central bank reserves.
10. **ZCOM inception date is October 25, 2025.
11. unaudited, estimated MER as of May 31, 2026,
12. Estimated as of April 28^th, 2026

Disclaimer:

This content is sponsored by BMO Exchange Traded Funds.

This content is intended for information purposes only. This content has been prepared by Dan Kent and represents its assessment at the time of publication. Dan Kent is compensated under this arrangement by BMO Exchange Traded Funds. The content contained herein does not necessarily represent the views of BMO Global Asset Management. The views expressed herein by Dan Kent are subject to change without notice. The content contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Any securities described herein must be evaluated relative to the individual’s investment objectives and risk profile, and professional advice should be obtained with respect to the individual’s particular circumstances.

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