Horizons ETFs has launched its new Horizons Intl Developed Markets Equity Index ETF (HXDM). Trading on the TSX, HXDM provides tax-efficient, low-cost indirect exposure to the widely followed MSCI EAFE Index, which encompasses developed-market stocks outside of North America.
The ETF aims to replicate the performance of the Horizons EAFE Futures Roll Index (Total Return) net of expenses. The index reflects returns over time from notional investments that represent a long position in a series of futures contracts on the MSCI EAFE Index.
As of September, the MSCI EAFE Index has 924 constituents spanning 21 ex-North America developed markets — including Australia, Continental Europe, Japan, and the UK. With a total free-float market capitalization of US$14.0 trillion as of this month, it covers around 85% of the free-float-adjusted market capitalization in each country.
“International developed market equity exposure, i.e. outside of North America, has been the number one asset class for ETF inflows in 2017,” Steve Hawkins, president and co-CEO of Horizons ETFs, said in a statement. “With HXDM, investors can access exposure to the returns of big international names like Unilever, Nestle and Shell without taxation eroding returns.”
According to Hawkins, this tax efficiency is possible because of Horizons’ total return index (TRI) structure; in the case of HXDM, the TRI structure replicates the return of the Horizons EAFE Futures Roll Index (Total Return).
No distributions are expected to be paid by HXDM; instead, any dividend or interest income is directly reflected in the ETF’s performance. This is beneficial for investors that invest in the ETF through non-registered accounts. The absence of trading costs from physical replication also reduces any error in tracking the index.
Aside from the normal units, units that trade in US dollars are also available (HXDM.U). Both USD and non-USD units have a management fee of 0.2%, plus applicable sales taxes.
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