Firm's first liquid-alt fixed-income ETF sub-advised by newly founded portfolio management boutique
Horizons ETFs has launched the Horizons Tactical Absolute Return Bond ETF on the TSX.
The new ETF, traded in Total Return Series shares (listed under the ticker symbol HARB) and Dividend Series shares (HARB.J), seeks to provide positive absolute returns along with low volatility over a market cycle, regardless of market conditions or general direction of the market. For investors holding Dividend Series shares, the ETF also aims to provide consistent income.
“HARB is the first fixed income ETF offered by Horizons that is what we would refer to as a 'liquid alternative,'” said Horizons ETFs President and CEO Steve Hawkins. “This is an ETF that will utilize a variety of long and short fixed income investment strategies to seek absolute returns regardless of the conditions of the capital markets.”
Acting as sub-advisor to the ETF is DMAT Capital Management (DMAT Capital), a boutique portfolio management firm founded by prominent Canadian fixed-income manager Barry Allan. With 38 years of industry experience, Allan has run mandates substantially covering the debt spectrum including government bonds, investment-grade bonds, high-yield bonds, and distressed bonds.
“The fixed income landscape has changed substantially in 2020,” said Allan, president, CEO and CIO of DMAT Capital. “To find appreciable yield, you need to be able to alter your duration, credit quality and liquidity to take advantage of all market conditions in real-time.”
The ETF strategy allows for long or short positions within the portfolio, as well as the use of leverage up to three times (300%) its net asset value across a range of North American and global debt instruments including government debt, corporate debt, preferred shares, fixed-income derivatives, and other income-producing instruments.
“The flexibility of HARB allows us to focus our portfolio positioning to seek to deliver the highest absolute and risk-adjusted return profile over the course of the investment cycle, while being able to respond and protect capital during periods of rising yields and widening spreads,” Allan said.
The ETF was constructed within Horizons ETFs’ corporate-class mutual fund structure, Horizons ETF Corp., which enables HARB to deliver investment returns in a tax-efficient way. Though Total Return Series shares (HARB) are not expected to make regular distributions, they can be advantageous if held in taxable accounts, where bond income distributions can be taxed at a rate of over 50% depending on the investor’s marginal tax rate.
