May 2, 2019

You may recall the popular 2011 film: Moneyball. The story follows the efforts of Billy Beane, the general manager of a major league baseball team, who is tasked with winning games with one of the smallest player budgets in the league. He does so by reducing the evaluation of player recruits to a statistical math and prediction problem. He mines for player value where traditional yardsticks of success might fail to fully identify potential. His passion for statistics inspires him to dig deeply into how and why a certain player is able to score runs and succeed in various facets of the game, and not just the most obvious ones.

It’s a story about the power of granular analysis and the ability to analyze and identify often-overlooked stats. Sure, the obvious expensive big sluggers sell jerseys, but Billy realized that paying attention to overlooked data like ‘base-on-balls’ is crucial to the overall goal of winning games. What he essentially did is improve the process by which various players with different strengths could be identified to perform both individually and together. He ends up assembling a rag-tag team of players that performs well above their pay grade, and baseball is changed forever.

One major category of innovation is called ‘Big Data’. It is predicated on amassing, storing, and creating value from large amounts of information. Big Data is one of the five categories of technology through which investors can gain exposure via the Horizons Industry 4.0 Index ETF (FOUR). Big Data provides the foundation for the Artificial Intelligence (“A.I.”) category of Machine Learning, which focuses on looking for an edge where it might not be as obvious by manually sifting through massive amounts of data. So what is Machine Learning? Prediction.

Why now? The cost of prediction has plunged. The cost of data, chipsets, related hardware and sensors have dropped dramatically. Prediction forms the basis for much of our decision-making – now the possibilities for analysis are vast, as we realize that hardware and software can help to accomplish many of these processes. A healthcare diagnosis is based on prediction.  Netflix movie suggestions and Google search results are based on prediction. Credit card anomaly activity analysis is prediction. Credit assessment for banks is based on prediction. Hedge fund analysis of merger probabilities based on CEO travel plans is prediction. A.I. mattresses that help us to get a better night’s sleep is prediction. This list could go on and on.

As more of our lives transition online, or at least to the digital realm, more data is available for that prediction. Mobile adoption rates are high, but most importantly usage rates are expanding by the day. We conduct more of our lives via our smartphones. That powerful computer in my pocket is 100,000 times more powerful than computers of the early 1970s. Many people allow their phones, directly or indirectly, to track their likes, dislikes, whereabouts, travel plans, purchases and more.

The creation of data has been rising exponentially and will likely continue to do so. FOUR gives investors exposure to five pockets of innovation that are driving technology in these modern times – Big Data is one of them. Big Data is big money as the ‘Moneyballing’ of everything is upon us. Billy Beane might agree that investing in Big Data may just be a home run.

The views/opinions expressed herein may not necessarily be the views of Horizons ETFs Management (Canada) Inc. All comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.

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The Horizons Exchange Traded Products include our BetaPro products (the “BetaPro Products”). The BetaPro Products are alternative mutual funds within the meaning of National Instrument 81-102 Investment Funds, and are permitted to use strategies generally prohibited by conventional mutual funds: the ability to invest more than 10% of their net asset value in securities of a single issuer, to employ leverage, and engage in short selling to a greater extent than is permitted in conventional mutual funds. While these strategies will only be used in accordance with the investment objectives and strategies of the BetaPro Products, during certain market conditions they may accelerate the risk that an investment in sahres of a BetaPro Product decreases in value. The BetaPro Products consist of our 2x Daily Bull and 2x Daily Bear ETFs (“2x Daily ETFs”), Inverse ETFs (“Inverse ETFs”) and our BetaPro S&P 500 VIX Short-Term Futures™ ETF (the “VIX ETF”). Included in the 2x Daily ETFs and the Inverse ETFs are the BetaPro Marijuana Companies 2x Daily Bull ETF (“HMJU”) and BetaPro Marijuana Companies Inverse ETF (“HMJI”), which track the North American MOC Marijuana Index (NTR) and North American MOC Marijuana Index (TR), respectively. The 2x Daily ETFs and certain other BetaPro Products use leveraged investment techniques that can magnify gains and losses and may result in greater volatility of returns. These BetaPro Products are subject to leverage risk and may be subject to aggressive investment risk and price volatility risk, among other risks, which are described in their respective prospectuses. Each 2x Daily ETF seeks a return, before fees and expenses, that is either 200% or –200% of the performance of a specified underlying index, commodity futures index or benchmark (the “Target”) for a single day. Each Inverse ETF seeks a return that is –100% of the performance of its Target. Due to the compounding of daily returns a 2x Daily ETF’s or Inverse ETF’s returns over periods other than one day will likely differ in amount and, particularly in the case of the 2x Daily ETFs, possibly direction from the performance of their respective Target(s) for the same period. Hedging costs charged to BetaPro Products reduce the value of the forward price payable to that ETF. Due to the high cost of borrowing the securities of marijuana companies in particular, the hedging costs charged to HMJI are expected to be material and are expected to materially reduce the returns of HMJI to unitholders and materially impair the ability of HMJI to meet its investment objectives. Currently, the manager expects the hedging costs to be charged to HMJI and borne by unitholders will be between 15.00% and 35.00% per annum of the aggregate notional exposure of HMJI’s forward documents. The hedging costs may increase above this range. The manager will publish, on its website, the updated monthly fixed hedging cost for HMJI for the upcoming month as negotiated with the counterparty to the forward documents, based on the then current market conditions. The VIX ETF, which is a 1x ETF, as described in the prospectus, is a speculative investment tool that is not a conventional investment. The VIX ETF’s Target is highly volatile. As a result, the VIX ETF is not intended as a stand-alone long-term investment. Historically, the VIX ETF’s Target has tended to revert to a historical mean. As a result, the performance of the VIX ETF’s Target is expected to be negative over the longer term and neither the VIX ETF nor its target is expected to have positive long-term performance. Investors should monitor their holdings in BetaPro Products and their performance at least as frequently as daily to ensure such investment(s) remain consistent with their investment strategies.

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