Toronto-based Horizons ETFs Management (Canada) Inc. and its affiliate, AlphaPro Management Inc., announced on Thursday the launch of the Horizons Active Cdn Municipal Bond ETF.

This the first Canadian exchange-traded fund (ETF) to invest in this country’s municipal bond market exclusively, according to the announcement from Horizons.

“Municipal bonds offer investors an attractive risk-return profile because they have a low risk of default but are higher yielding than other types of Canadian government and provincial bonds,” says Howard Atkinson, president of Horizons, in a statement.

Units of the ETF began trading on the Toronto Stock Exchange on Thursday under the ticker symbols “HMP” for Class E units and “HMP.A” for Advisor Class units.

Montreal-based Fiera Capital Corp. is subadvising the actively managed ETF, which invests in a portfolio of Canadian municipal bonds. Up to 75% of the portfolio can be invested in non-rated Canadian municipal bonds, which are generally issued by mid-size municipalities and offer a slightly higher yield than the rated debt of larger Canadian cities, Horizons’ announcement states.

“Based on our solid track record in managing non-rated bonds, we see a tremendous opportunity in enhancing the yield of HMP’s portfolio without increasing its risk,” says François Bourdon, chief investment solutions officer with Fiera, in a statement. “Our extensive independent credit analysis not only ensures that a municipality can meet its debt obligations, it also takes into account factors such as demographics and industries within a municipality in order to determine which issues to ultimately hold.”

The size of the municipal bond market in Canada is approximately $40 billion, with Quebec municipalities making up almost half of the outstanding issues. Currently, non-rated municipal bonds represent approximately $16 billion, or 40% of the market, according to Horizons’ announcement.