Horizons ETFs has launched the Horizons Equal Weight Canada REIT Index ETF (HCRE) and the Horizons Equal Weight Canada Banks Index ETF (HEWB) on the TSX.
The two funds join the Horizons Total Return Index (TRI) ETF suite, which is characterized by an innovative “total return swap” investment structure. By using total return swap contracts to replicate the performance of the index, as opposed to physically holding assets, the TRI ETFs provide returns for investors in a low-cost, low-tracking-error, and tax-efficient manner. With HCRE and HEWB, the suite has been expanded to 14 ETFs, with another to launch in February.
“Since introducing our first TRI ETF in 2010, the Horizons TRI ETF suite has continued to grow, providing investors with tax-advantaged access to an increasing variety of important index strategies from around the world,” said Horizons ETFs President and CEO Steve Hawkins. “The additions of HCRE and HEWB are made-in-Canada ETFs that provide access to two investing themes popular with Canadians: real estate and Canadian banks.”
HCRE seeks to replicate, to the extent possible and net of expenses, the performance of the Solactive Equal Weight Canada REIT Index (Total Return), an equal-weight index of Canadian-listed real estate investment trust equity securities. By investing in publicly traded REITs, HCRE can let investors earn a share of rental income from large real-estate assets.
Meanwhile, HEWB seeks to replicate, to the extent possible and net of expenses, the performance of the Solactive Equal Weight Canada Banks Index (Total Return), an equal-weight index of equity securities of diversified Canadian banks. HEWB invests in Canada’s six largest banks, otherwise known as the “Big Six”: Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Bank of Nova Scotia (Scotiabank), Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC) and National Bank of Canada (National Bank).
By using an equal-weight methodology, the two funds expose investors to a more diversified representation of their respective sectors’ performance. In effect, it avoids the more concentrated exposure associated with a market-capitalization methodology.
“While similar strategies exist amongst current ETF listings in Canada, HCRE and HEWB are the only ETFs that seek to achieve their investment objectives using our tax-efficient total return swap structure,” Hawkins added.
HCRE and HEWB have management fees of 0.5% and 0.4%, respectively. Both funds also come with an automatic reinvestment feature, where index constituent distributions are automatically reinvested to potentially result in more efficient compounding compared to ETFs that compound only quarterly or even monthly.
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