New Horizons ETFs designed for tax efficiency

The Horizons U.S. Large Cap Index ETF (HULC) seeks to replicate the performance of the Solactive U.S. Large Cap Index, net of expenses. The fund will hold the benchmark’s constituent securities, so will have no swap fee. The management fee is 0.08%, plus applicable sales taxes.

The Horizons S&P/TSX Capped Composite Index ETF (HXCN) seeks to replicate the performance of the S&P/TSX Capped Composite Index (Total Return), net of expenses. The fund uses a synthetic total return swap structure, and the management fee is 0.05%, plus applicable sales taxes.

The Horizons Cash Maximizer ETF (HSAV) seeks to generate modest capital growth by investing mostly in high-interest deposit accounts with Canadian banks. The management fee is 0.18%, plus applicable sales taxes.

Each of the new ETFs offers “competitive fees relative to comparable passively managed ETFs in the Canadian ETF market, with the added benefit of our unique total return structure,” said Steve Hawkins, president and CEO at Horizons ETFs, in the release.

All the firm’s total return ETFs are part of a single, multi-class corporate structure, which permits the ETFs to improve operational efficiency, aggregate all future gains and losses on both the income and capital accounts, and substantially reduce the likelihood of distributions, the release said. With no distributions, the funds offer tax efficiency in taxable accounts.

While HULC and HSAV directly hold their securities or cash, and will thus receive distributions and interest, respectively, the release said that “in the view of Horizons ETFs, the benefits of the corporate class structure will allow Horizons ETFs to greatly reduce the potential for distributions to investors from these ETFs.”

Shares of the new ETFs began trading on the Toronto Stock Exchange on Thursday.