Equity Essentials ETFs offer exposure to Canadian Large-Cap Equity, U.S. Large-Cap Equity, and Canadian Banks
TORONTO – July 6, 2023 – Horizons ETFs Management (Canada) Inc. (“Horizons ETFs” or the “Manager“) is pleased to make two big announcements:
- The launch of five new ETFs that aim to accelerate the performance of Canada’s big banks and U.S. and Canadian large cap stocks through the strategic use of leverage, or leverage together with covered calls (the “Enhanced ETFs”).
- The launch of the Horizons Equal Weight Banks Index ETF (“HBNK”) – Canada’s lowest-cost Canadian Bank ETF¹ – with an effective management fee and MER of 0.00% until July 31, 2024.
In Canada, just three ETF categories account for more than $120 billion or approximately one-third of total ETF assets under management: Large-Cap Canadian Equity, Large-Cap U.S. Equity, and Canadian Financial Services Equity². Horizons ETFs now offers Canadians the most comprehensive and among the most cost-effective ways to participate in these “Equity Essentials” categories.
Each Equity Essentials ETF uses up to three strategies to help investors optimize their risk exposure and performance potential: Low-cost benchmark tracking, 1.25 times leverage (“1.25x”) to potentially amplify returns, and covered call writing to enhance income.
The Enhanced ETFs and HBNK (together, the “ETFs”) closed their initial offering of units on July 5, 2023, and will begin trading on the TSX when it opens this morning.
“We’re helping Canadians access core equity in ways that work for them, whether they want low-cost benchmark, potentially amplified performance, or greater income potential through covered calls,” said Rohit Mehta, President and CEO of Horizons ETFs. “Our new ETFs are a powerful new way for investors to get the exposure they want to the most important – and most essential – equity categories in Canada.”
This table outlines the six new Horizons ETFs:
| ETF Name and Ticker | Investment Objective | Target Leverage Ratio | Mgmt Fee* | Initial Target Annualized Net Yield³ |
|---|---|---|---|---|
| Horizons Equal Weight Banks Index ETF (“HBNK”) | Seeks to replicate, to the extent reasonably possible and net of expenses, the performance of an index of equal-weighted equity securities of diversified Canadian banks (currently, the Solactive Equal Weight Canada Banks Index). | Not Leveraged | 0.09% (rebated to 0.00% until July 31, 2024) | 5.2% |
| Horizons Enhanced Equal Weight Banks Index ETF (“BNKL”) | Seeks to replicate, to the extent reasonably possible and net of expenses, 1.25 times (125%) the performance of an index of equal-weighted equity securities of diversified Canadian banks (currently, the Solactive Equal Weight Canada Banks Index). | 1.25x | 0.35% | 6.1% |
| Horizons Enhanced Equal Weight Canadian Banks Covered Call ETF (“BKCL”) | Seeks to provide, to the extent reasonably possible and net of expenses: (a) exposure to the performance of an index of equal-weighted equity securities of diversified Canadian banks (currently, the Solactive Equal Weight Canada Banks Index); and (b) high monthly distributions of dividend and call option income. To generate income, BKCL will be exposed to a dynamic covered call option writing program. BKCL will also employ leverage through cash borrowing and will generally endeavour to maintain a leverage ratio of approximately 125%. | 1.25x | 0.65% | 15.6% |
| Horizons Enhanced S&P/TSX 60 Index ETF (“CANL”) | Seeks to replicate, to the extent reasonably possible and net of expenses, 1.25 times (125%) the performance of an index of equity securities representing the large-cap market segment of the Canadian equity market (currently, the S&P/TSX 60™ Index). CANL will use leverage in order to seek to achieve its investment objective through the use of cash borrowings or as otherwise permitted under applicable securities legislation. | 1.25x | 0.35% | 4.2% |
| Horizons Enhanced Canadian Large Cap Equity Covered Call ETF (“CNCL”) | Seeks to provide, to the extent reasonably possible and net of expenses: (a) exposure to the performance of the large-cap market segment of the Canadian equity market; and (b) high monthly distributions of dividend and call option income. To generate income, CNCL will be exposed to a dynamic covered call option writing program. CNCL will also employ leverage through cash borrowing and will generally endeavour to maintain a leverage ratio of approximately 125%. | 1.25x | 0.65% | 12.5% |
| Horizons Enhanced US Large Cap Equity Covered Call ETF (“USCL”) | Seeks to provide, to the extent reasonably possible and net of expenses: (a) exposure to the performance of the large-cap market segment of the U.S. equity market; and (b) high monthly distributions of dividend and call option income. To generate income, USCL will be exposed to a dynamic covered call option writing program. USCL will also employ leverage through cash borrowing and will generally endeavour to maintain a leverage ratio of approximately 125%. | 1.25x | 0.65% | 14.0% |
* Plus applicable sales tax
HOW DOES 1.25X LEVERAGE WORK?
Five of the six ETFs launched today – BNKL, BKCL, CANL, CNCL, and USCL – use leverage, a strategy that can potentially magnify both gains and losses. These Enhanced ETFs aim to generate approximately 1.25x the return of their underlying index.
To do this, each of the Enhanced ETFs creates leverage using cash borrowing and invests, on a leveraged basis, in a related ETF managed by Horizons ETFs. To ensure risk is limited to the capital invested, each Enhanced ETF will be regularly monitored and seeks to maintain a leverage ratio of approximately 125%, or 1.25x, of its NAV.
“Using a light leverage approach to investing can potentially provide a significantly higher return than traditional benchmark exposure over an extended period,” continued Mr. Mehta. “Our Enhanced ETFs let Canadians potentially get more from their core equities, whether it’s extra income potential from covered calls or the use of leverage to potentially accelerate returns.”
HOW DOES HBNK ACHIEVE AN EFFECTIVE FEE OF 0.00% UNTIL JULY 31, 2024?
The only non-enhanced ETF among today’s launch is HBNK, which provides equal-weight exposure to Canada’s Big Six banks – Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce, and National Bank of Canada.
Horizons ETFs has agreed to voluntarily rebate 0.09% of the management fee until July 31, 2024 (“the “Rebate Period”). As of today, HBNK will be the lowest-cost Canadian bank ETF available, with an effective management fee of 0.00% during the Rebate Period¹. When the Rebate Period ends, HBNK’s management fee will revert to 0.09%, which as at today, would still be the lowest among all Canadian Bank ETFs currently available.
“Canada’s Big Six Banks represent more than one-fifth of the S&P/TSX 60 Index,” said Mr. Mehta. “With HBNK, we’re excited to give investors the opportunity to access what has been one of the most stable and dividend-rich sectors through the lowest-cost ETF in the country.”
MANAGEMENT FEES FOR THREE EXISTING COVERED CALL ETFS NOW REDUCED BY 40%
Horizons ETFs is reducing the management fees on three existing covered call ETFs within the Equity Essentials suite: the Horizons Equal Weight Canadian Bank Covered Call ETF (“BKCC”), the Horizons US Large Cap Equity Covered Call ETF (“USCC.U”), and the Horizons Canadian Large Cap Equity Covered Call ETF (“CNCC”). The management fee for each of BKCC, USCC.U and CNCC will be reduced from 0.65% to 0.39% – a 26 basis point reduction, effective today, July 6, 2023.
Here is the full family of Horizons ETFs’ Equity Essentials:
| Large-Cap Canadian Equity | Large-Cap U.S. Equity | Canadian Banks |
|---|---|---|
|
About Horizons ETFs Management (Canada) Inc. (www.HorizonsETFs.com)
Horizons ETFs Management (Canada) Inc. is an innovative financial services company with 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 currently has more than $26 billion of assets under management and 113 ETFs listed on major Canadian stock exchanges. Horizons ETFs is a wholly owned subsidiary of the Mirae Asset Financial Group, which manages approximately $710 billion of assets across 13 countries around the world.
Investor inquiries:
Contact Horizons ETFs at 1-866-641-5739 (toll-free) or (416) 933-5745
[email protected]
Media inquiries:
Contact Jonathan McGuire
Assistant Vice President, ETF Strategy
Horizons ETFs Management (Canada) Inc.
(416) 640-2956
[email protected]
¹Based on all publicly available information as at the time of this press release
²Morningstar as at May 31, 2023
³The amount of the monthly distributions of an ETF, and therefore the initial targeted annualized net yield and the ongoing annualized net yield of an ETF, may fluctuate based on market conditions. There can be no assurance that an ETF will make any distribution in any particular period or periods. The Manager may, in its complete discretion, change the frequency of these distributions, and any such change will be announced by press release.
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 value changes frequently and past performance may not be repeated. Certain Horizons Exchange Traded Products may have exposure to leveraged investment techniques that magnify gains and losses and which may result in greater volatility in value and could be subject to aggressive investment risk and price volatility risk. Such risks are described in the prospectus. The prospectus contains important detailed information about the Horizons Exchange Traded Products. Please read the relevant prospectus before investing.
Each of the Enhanced ETFs is an alternative mutual fund within the meaning of NI 81-102, and is permitted to use strategies generally prohibited by conventional mutual funds, such as the ability to invest more than 10% of the Enhanced ETF’s net asset value in securities of a single issuer, the ability to borrow cash and to employ leverage. While these strategies will only be used in accordance with the applicable investment objectives and strategies of the Enhanced ETFs, during certain market conditions they may accelerate the risk that an investment in Units of such Enhanced ETF decreases in value.
The financial instrument is not sponsored, promoted, sold, or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade name or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade name for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.
“Standard & Poor’s®” and “S&P®” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “TSX®” is a registered trademark of the TSX Inc. (“TSX”). These marks have been licensed for use by Horizons ETFs Management (Canada) Inc. The ETF is not sponsored, endorsed, sold, or promoted by the S&P, TSX, or their affiliated companies and none of these parties make any representation, warranty, or condition regarding the advisability of buying, selling or holding units/shares of the ETF.
Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking statements are not historical facts but reflect the author’s 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 such forward-looking statements. These forward-looking statements are made as of the date hereof and the authors 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.
This communication is intended for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase exchange traded products (the “Horizons Exchange Traded Products”) managed by Horizons ETFs Management (Canada) Inc. and is not, and should not be construed as, investment, tax, legal or accounting advice, and should not be relied upon in that regard. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. These investments may not be suitable to the circumstances of an investor.
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Topics: Canadian Banks