The financial service company has launched two new ETF products to expand their low-cost, tax-efficient lineup
A recent release from Horizons ETFs Management Inc. announced the launch of two new ETFs: the Horizons S&P 500® CAD Hedged Index ETF (TSX: HSH) and the Horizons US 7-10 Year Treasury Bond CAD Hedged ETF (TSX:HTH).
The first product, HSH, aims to replicate, to the degree possible and net of expenses, the performance of the S&P 500 CAD Hedged Index (Total Return). The index is a measure of the performance of large-cap players in the US equity market, hedged to the Canadian dollar.
HTH, in a similar way, aims to follow, to the extent possible and net of expenses, the performance of the Solactive US 7-10 Year Treasury Bond CAD Hedged Index (Total Return). This index is meant to track the performance of the US 7- to10-Year Treasury Bond market, hedged to the loonie.
“At Horizons, we have historically been of the view that having non-hedged exposure to U.S. securities markets can be more beneficial than currency hedging over the long term,” said Steve Hawkins, president and co-CEO of Horizons ETFs. “However, we also recognize that there are many investors who are averse to foreign currency exposure, and even more investors who want the ability to dynamically allocate between hedged and non-hedged versions of U.S. securities ETFs, in order to take advantage of currency fluctuations between the Canadian and U.S. dollars.”
The two new products are the latest additions to Horizons’ low-cost, tax-efficient Total Return Index (TRI) ETFs. TRI ETFs replicate indices using a synthetic replication structure. This allows them to receive pre-tax total returns of an index, which would be impossible for physically replicated ETFs.
TRI ETFs should not pay distributions, instead reflecting the value of dividend or interest income in the returns of each ETF. This results in better tax efficiency for investors who hold the ETF in non-registered investment accounts. Tracking error is also reduced because of the absence of portfolio trading costs.
“Our family of TRI ETFs have been one the fastest-growing areas of our ETF business, increasing our assets under management in TRI ETFs by more than 30% this year, as investors look for lower-cost and more tax-efficient ways to get index exposure,” Hawkins said. “HSH and HTH have the same management fees as their non-hedged counterparts and provide the same tax benefits.”
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The first product, HSH, aims to replicate, to the degree possible and net of expenses, the performance of the S&P 500 CAD Hedged Index (Total Return). The index is a measure of the performance of large-cap players in the US equity market, hedged to the Canadian dollar.
HTH, in a similar way, aims to follow, to the extent possible and net of expenses, the performance of the Solactive US 7-10 Year Treasury Bond CAD Hedged Index (Total Return). This index is meant to track the performance of the US 7- to10-Year Treasury Bond market, hedged to the loonie.
“At Horizons, we have historically been of the view that having non-hedged exposure to U.S. securities markets can be more beneficial than currency hedging over the long term,” said Steve Hawkins, president and co-CEO of Horizons ETFs. “However, we also recognize that there are many investors who are averse to foreign currency exposure, and even more investors who want the ability to dynamically allocate between hedged and non-hedged versions of U.S. securities ETFs, in order to take advantage of currency fluctuations between the Canadian and U.S. dollars.”
The two new products are the latest additions to Horizons’ low-cost, tax-efficient Total Return Index (TRI) ETFs. TRI ETFs replicate indices using a synthetic replication structure. This allows them to receive pre-tax total returns of an index, which would be impossible for physically replicated ETFs.
TRI ETFs should not pay distributions, instead reflecting the value of dividend or interest income in the returns of each ETF. This results in better tax efficiency for investors who hold the ETF in non-registered investment accounts. Tracking error is also reduced because of the absence of portfolio trading costs.
“Our family of TRI ETFs have been one the fastest-growing areas of our ETF business, increasing our assets under management in TRI ETFs by more than 30% this year, as investors look for lower-cost and more tax-efficient ways to get index exposure,” Hawkins said. “HSH and HTH have the same management fees as their non-hedged counterparts and provide the same tax benefits.”
Related stories:
RBC GAM launches income-oriented ETFs
New Mackenzie funds and ETFs announced
