New European index-tracking ETF is a Canadian first
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Horizons ETFs has launched the Horizons EURO STOXX 50® Index ETF, a first-of-its-kind product that offers low-cost, tax-efficient access to 50 of Europe’s largest sector-leading companies. It is trading on the TSX under the ticker symbol HXX.
The ETF aims to track, as much as possible, the performance of the EURO STOXX 50® Futures Roll Index (Total Return), net of expenses. The index is formulated to reflect returns over time through notional long-position investments in a series of futures contracts on the EURO STOXX 50® Index.
Aside from being the first Canadian ETF to track the EURO STOXX 50®, HXX also marks the first time for a Canadian ETF provider to license an index from STOXX Ltd. to provide exposure to the leading blue-chip index.
The index, which also happens to be STOXX’s most widely followed strategy, covers 50 stocks from 19 super-sectors in 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain.
HXX is managed following Horizons ETFs’ total return index (TRI) formula, a low-cost, index-replicating structure that allows the fund to receive the pre-tax total return of an index via a synthetic replication structure. Unlike physically-replicated ETFs which pay distributions, HXX will directly reflect the value of any dividend or interest income in its performance. This allows increased tax efficiency for investors who hold the ETF in non-registered investment accounts. Since there are no portfolio trading costs, the TRI structure also has reduced tracking error compared to other ETFs.
“European stocks currently offer higher dividends on average than would currently be earned on similar North American stocks. Taxes, which include foreign withholding tax, eliminate a lot of the yield advantage of these stocks,” said Steve Hawkins, president and Co-CEO of Horizons ETFs. “HXX's unique TRI structure largely eliminates immediate taxation of these distributions which should result in a better after-tax return for holders of HXX versus other Canadian-listed European equity index ETFs.”
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