Toronto-based Horizons ETFs Management (Canada) Inc. has launched an ETF designed to provide investors with low-cost and tax-efficient exposure to the performance of 50 of the largest, sector-leading companies in Europe.
Horizons Euro Stoxx 50 Index ETF seeks to replicate the total return version of the Euro Stoxx 50 futures roll index, net of expenses. The index currently covers 50 stocks from 19 sectors in Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
The new ETF also uses the firm’s total return index (TRI) structure to ensure that investors’ exposure to the total return version of the Euro Stoxx 50 futures roll index is tax-efficient.
Within the TRI structure, distributions are not paid by the ETF. Instead, the value of any dividend or interest income is directly reflected in the performance of the ETF, which would lead to greater tax efficiency for investors who hold the ETF in non-registered investment accounts, according to the announcement.
“European stocks currently offer higher dividends on average than would currently be earned on similar North American stocks,” says Steve Hawkins, president and co-CEO of Horizons ETFs, in a statement.
“Taxes, which include foreign withholding tax, eliminate a lot of the yield advantage of these stocks,” he adds. “[Horizons Euro Stoxx 50 Index ETF’s] unique TRI structure largely eliminates immediate taxation of these distributions which should result in a better after-tax return for holders of [this product] vs other Canadian-listed European equity index ETFs.”
Photo copyright: melpomen/123RF