Three new ETFs provide exposure to U.S. large-cap equities, the S&P/TSX Capped Composite, and high interest savings accounts, respectively

TORONTO – February 6, 2020 – Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”) is pleased to announce the launch of three new total return1 ETFs (“Total Return ETFs”): the Horizons US Large Cap Index ETF (“HULC”), the Horizons S&P/TSX Capped Composite Index ETF (“HXCN”) and the Horizons Cash Maximizer ETF (“HSAV”). Shares of these Total Return ETFs will begin trading today on the Toronto Stock Exchange (“TSX”).

HULC, HXCN and HSAV join the Horizons ETFs family of Total Return ETFs which now offers exposure to 18 different benchmarks or asset classes. These ETFs can use either a total return swap or physical replication in order to deliver the total return of the underlying investment strategy with minimal tracking error (in the case of HULC and HXCN) and competitive management fees. Similar to other Horizons Total Return ETFs, HULC, HXCN and HSAV are not currently expected to pay any distributions to investors. The table below outlines the respective investment objectives of the new strategies and their management fees.

All of the Total Return ETFs are part of a single, multi-class corporate structure, which permits the ETFs to improve operational efficiency, aggregate all future gains and losses on both the income and capital accounts and substantially reduce the likelihood of distributions.

ETF Name and Ticker(s) Investment Objective Management Fee*
Horizons US Large Cap Index ETF (HULC and HULC.U:TSX)

HULC seeks to replicate, to the extent possible, the performance of the Solactive US Large Cap Index (CA NTR) (The “HULC Index”), net of expenses. The HULC Index is designed to measure the performance of the large- cap market segment of the U.S. equity market.

0.08%
Horizons S&P/TSX
Capped Composite Index ETF (HXCN:TSX)

Horizons S&P/TSX Capped Composite Index ETF (HXCN) seeks to replicate, to the extent possible, the performance of the S&P/TSX Capped Composite Index (Total Return) (the “HXCN Index”), net of expenses. The HXCN Index is designed to measure the performance of the broad large-cap market segment of the Canadian equity market, with a capped weight of 10% on all constituent issuers.

0.05%
Horizons Cash Maximizer ETF (HSAV:TSX)

HSAV seeks to generate modest capital growth by investing primarily in high interest deposit accounts with Canadian banks. While any decision to pay dividends or other distributions is within the discretion of the Manager, HSAV is not currently expected to make any regular distributions.

0.18%
 

*Plus applicable sales taxes.

HXCN will use a synthetic, total return swap structure. Unlike traditional physically-replicated ETFs, HXCN will instead seek to receive the total return of the HXCN Index by entering into swap agreements with large Canadian financial institutions. Horizons ETFs does not currently expect HXCN to make regular distributions.

HULC and HSAV will seek to achieve their investment objectives by directly holding physical securities, cash and/or cash equivalents in their portfolio. This means that these ETFs will receive distributions and interest directly to their respective portfolios. However, in the view of Horizons ETFs, the benefits of the corporate class structure will allow Horizons ETFs to greatly reduce the potential for distributions to investors from these ETFs. For this reason, Horizons ETFs does not currently expect either HULC or HSAV to make regular distributions.

These new ETF launches within our corporate class structure expand our total return investment offerings to these three popular new strategies: traditional U.S. large-cap equities, the S&P/TSX Capped Composite, and high interest savings accounts,” said Steve Hawkins, President and CEO of Horizons ETFs. “In each case, we are offering ETFs that have competitive fees relative to comparable passively-managed ETFs in the Canadian ETF market, with the added benefit of our unique total return structure.

Horizons US Large Cap Index ETF (HULC)

HULC directly invests in a portfolio of the leading large-capitalization companies listed in the United States. HULC will receive the underlying dividends from the equity securities in the portfolio but it is currently not expected to distribute those dividends to its shareholders. The net value of those dividends are reinvested back into the HULC portfolio and will be reflected in the net asset value (“NAV”) of the ETF. This is a key differentiating feature of HULC versus other large-cap U.S. equity index ETFs. HULC is also available to be traded in U.S. dollars through the ticker HULC.U.

We have had a lot of success raising assets in our Horizons S&P 500 Index ETF (“HXS”), but shareholders typically only hold that ETF in taxable accounts because the total cost of ownership, which includes a 0.30% swap fee, may not make as much economic or operational sense for registered accounts,” said Mr. Hawkins. “With a management fee of 0.08% and no swap fee, HULC has the potential to be more cost-effective and operationally efficient for all types of investment accounts, and will still offer the benefit of our unique total return structure for taxable accounts since it is not currently expected to pay any distributions.

Horizons S&P/TSX Capped Composite Index ETF (HXCN)

HXCN offers investors synthetic exposure to the total return of the S&P/TSX Capped Composite Index, which is comprised of the 234 largest stocks listed on the Toronto Stock Exchange.

With a management fee of 0.05%, HXCN will be priced in line with the other S&P/TSX Capped Composite Index ETFs listed in Canada,” said Mr. Hawkins. “HXCN will, however, have the added benefit of offering tax efficiency for taxable accounts since, like HULC, HXCN is not currently expected to pay any distributions.

The Horizons Cash Maximizer ETF (HSAV)

Amid market uncertainty, cash-holding ETFs have gained popularity in Canada with approximately $2 billion in net in-flows occurring in 20192. With the introduction of HSAV, Horizons ETFs is improving on the existing cash-like ETF landscape by giving investors access to a total return strategy that is not currently expected to make distributions, despite its high interest savings mandate.

Similar to other high interest savings ETFs, HSAV will invest in high interest savings accounts that are offered by the leading Canadian chartered banks for a competitive management fee,” said Mr. Hawkins. “However, HSAV offers a unique total return strategy which, unlike its direct competitor ETFs, isn’t currently expected to pay out any interest distributions to shareholders.

HULC, HXCN and HSAV have closed their initial offering of shares and will begin trading on the TSX when the market opens this morning.

About Horizons ETFs Management (Canada) Inc. (www.HorizonsETFs.com)
Horizons ETFs Management (Canada) Inc. is an innovative financial services company and offers one of the largest suites of exchange traded funds in Canada. The Horizons ETFs product family includes a broadly diversified range of solutions for investors of all experience levels to meet their investment objectives in a variety of market conditions. Horizons ETFs has approximately $11.7 billion of assets under management and 94 ETFs listed on major Canadian stock exchanges.

For investor inquiries:
Contact Horizons ETFs at 1-866-641-5739 (toll-free) or (416) 933-5745
info@horizonsetfs.com

For media inquiries:
Contact Jonathan McGuire
External Communications Manager
Horizons ETFs Management (Canada) Inc. (416) 640-2956
jmcguire@horizonsetfs.com

Certain statements may constitute a forward looking statement, including those identified by the expressions “anticipate”, “estimate” or “expect” and similar expressions (including grammatical variations thereof) to the extent they relate to the ETFs or Horizons ETFs. The forward-looking statements are not historical facts but reflect the ETFs, the ETF’s managers or Horizons ETFs current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on the ETFs’ forward looking statements. These forward-looking statements are made as of the date hereof and the ETFs do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events or otherwise, unless required by applicable law.

1Horizons Total Return ETFs (“Horizons Total Return ETFs”) are generally index-tracking ETFs that use an innovative investment structure known as a Total Return Swap to deliver the returns of an underlying benchmark in a low-cost and tax-efficient manner. Unlike a physical replication ETF that typically purchases the securities found in the relevant benchmark in the same proportions as the benchmark, most Horizons Total Return ETFs use a synthetic structure that never buys the securities of a benchmark directly. Instead, the ETF receives the total return of the benchmark through entering into a Total Return Swap agreement with one or more counterparties, typically large financial institutions, which will provide the ETF with the total return of the benchmark in exchange for the interest earned on the cash held by the ETF. Any distributions which are paid by the benchmark’s constituents are reflected automatically in the net asset value (NAV) of the ETF. As a result, the Horizons Total Return ETF receives the total return of the benchmark (before fees), which is reflected in the ETF’s share price, and investors are not expected to receive any taxable distributions. Certain Horizons Total Return ETFs use physical replication instead of a total return swap, which includes HULC. The Horizons Cash Maximizer ETF does not track a traditional benchmark but rather a compounding rate of interest paid on a cash deposit that can change over time.

2Source: Morningstar, as at November 31, 2019

Download PDF

Share This Article

Next article
 

Horizons ETFs Announces Change to ETF Risk Rating

This website uses cookies to ensure we give you the best experience. By continuing to browse the site, you are agreeing to our use of cookies. Click here to read our privacy policy.

Commissions, management fees and expenses all may be associated with an investment in exchange traded products managed by Horizons ETFs Management (Canada) Inc. (the "Horizons Exchange Traded Products"). The Horizons Exchange Traded Products are not guaranteed, their values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the Horizons Exchange Traded Products. Please read the relevant prospectus before investing.

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 shares of a BetaPro Product decreases in value. The BetaPro Products consist of our Daily Bull and Daily Bear ETFs (“Leveraged and Inverse Leveraged ETFs”), Inverse ETFs (“Inverse ETFs”) and our BetaPro S&P 500 VIX Short-Term Futures™ ETF (the “VIX ETF”). Included in the Leveraged and Inverse Leveraged 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 Leveraged and Inverse Leveraged 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 Leveraged and Inverse Leveraged ETF seeks a return, before fees and expenses, that is either up to, or equal to, 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 Leveraged and Inverse Leveraged 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 Leveraged and Inverse Leveraged ETFs, possibly direction from the performance of their respective Target(s) for the same period. For certain Leveraged and Inverse Leveraged ETFs that seek up to 200% or up to or -200% leveraged exposure, the Manager anticipates, under normal market conditions, managing the leverage ratio as close to two times (200%) as practicable however, the Manager may, at its sole discretion, change the leverage ratio based on its assessment of the current market conditions and negotiations with the respective ETF’s counterparties at that time. 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 10.00% and 45.00% per annum of the aggregate notional exposure of HMJI’s forward documents. The hedging costs may increase above this range. The manager publishes 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.

Horizons Total Return Index ETFs (“Horizons TRI ETFs”) are generally index-tracking ETFs that use an innovative investment structure known as a Total Return Swap to deliver index returns in a low-cost and tax-efficient manner. Unlike a physical replication ETF that typically purchases the securities found in the relevant index in the same proportions as the index, most Horizons TRI ETFs use a synthetic structure that never buys the securities of an index directly. Instead, the ETF receives the total return of the index through entering into a Total Return Swap agreement with one or more counterparties, typically large financial institutions, which will provide the ETF with the total return of the index in exchange for the interest earned on the cash held by the ETF. Any distributions which are paid by the index constituents are reflected automatically in the net asset value (NAV) of the ETF. As a result, the Horizons TRI ETF receives the total return of the index (before fees), which is reflected in the ETF’s share price, and investors are not expected to receive any taxable distributions. Certain Horizons TRI ETFs use physical replication instead of a total return swap. The Horizons Cash Maximizer ETF and Horizons USD Cash Maximizer ETF do not track an index but rather a compounding rate of interest paid on a cash deposit that can change over time.

*The indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The rates of return shown in the table are not intended to reflect future values of the ETF or returns on investment in the ETF. Only the returns for periods of one year or greater are annualized returns.