ETF provider unveils change as a result of policy measures by the Bank of Canada
Horizons ETFs is instituting a 10-basis point rebate on the annual fee of its Horizons Cash Maximizer ETF (TSX: HSAV) after the Bank of Canada drastically lowered its key policy rate in the face of the coronavirus crisis.
According to the firm, the change will take effect on April 1, and will be kept in place until further notice. During the rebate period, HSAV will have an effective annual management fee of eight basis points, including applicable sales taxes.
“The key policy rate offered by the Bank of Canada has declined by more than 1.50% since we launched HSAV in early February of 2020,” said Horizons ETFs President and CEO Steve Hawkins. “This has effectively reduced the gross yield earned on HSAV to less than 0.75%, versus the approximate 2.25% that HSAV was earning at time of launch.”
As the COVID-19 crisis began in February and deepened throughout March, the BoC has announced measures to support the economy, including two emergency rate cuts that helped bring its key policy rate down to 0.25%. The firm said that it will continue to monitor the central bank’s overnight rate, and anticipates that the management fee rebate will remain as is and in place until the overnight rate changes.
“Given the dramatic decline in the income being generated by HSAV in this low interest rate environment, we have reduced the cost of investing in HSAV so that unitholders can retain more of its income,” Hawkins said. Horizons continues to believe that high-interest savings account ETFs still have real value as safe-haven investments during periods of extreme market uncertainty, he added.
“With this management fee rebate, HSAV will, for now, be the lowest-cost high interest savings ETF in Canada, while retaining its innovative total return structure,” Hawkins said.
