Horizons ETFs Management (Canada) has launched US dollar-denominated units of the Horizons S&P 500 Index ETF (HXS).
The US dollar denominated units of the Horizons S&P 500 ETF will begin trading on the Toronto Stock Exchange on 1 April 2013 under the ticker symbol HXS.U.
The launch of US dollar denominated units of the Horizons S&P 500 ETF coincides with the previously announced change of its investment objective and change of name which are also effective as of 1 April 2013.
In accordance with a previously approved investment objective change, all units of HXS will no longer seek to replicate a Canadian dollar hedged version of the S&P 500 Index and will instead to seek to replicate, to the extent possible, the performance of the S&P 500 Index (Total Return), net of expenses.
“We’ve heard from the Canadian marketplace that investors would prefer to get non-hedged or direct US dollar exposure to the S&P 500 Index,” says Howard Atkinson, president of Horizons ETFs. “Given that the Canadian dollar more or less trades around parity these days, it doesn’t make as much sense to use a currency hedge, which historically has increased the tracking error of index ETFs that seek to replicate a US stock index. We think that both the Canadian dollar and US dollar denominated versions of the Horizons S&P 500 ETF will now be more efficient at tracking the underlying S&P 500 Index (Total Return).”
HXS will continue to use a total return swap to replicate the performance of the S&P 500 Index (Total Return). Because it does not receive or pay any cash distributions, HXS is not subject to US withholding, US dividend or US estate taxes.
“The Horizons S&P 500 ETF will continue to be one of the lowest cost and most tax-efficient US stock index ETFs in Canada,” says Atkinson. “Investors now have the option of purchasing the ETF in US dollars, a powerful option for Canadian investors who may want to deploy US cash assets into the US stock market but don’t want to receive taxable distributions or have their investments subject to US withholding or estate taxes.
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