Horizons ETFs Management is reducing the annual management fee structure of the Horizons S&P/TSX 60 Equal Weight Index ETF (HEW) to 0.40 per cent or 40 basis points on any portion of the net assets over USD30 million.
Previously, the annual management fee was 0.50 per cent on all of the net assets of HEW.
The current net assets of HEW are more than USD32 million so the fee reduction has an immediate impact on the fees charged to HEW and its unitholders will benefit further should the ETF grow in size. HEW’s management fees are calculated and accrued daily and payable monthly in arrears.
HEW is the only ETF in Canada to track the S&P/TSX 60 Equal Weight Index. Rather than weight each of the 60 stocks in the Index by their market capitalisation, which is the traditional way most large cap stock indices determine stock weights, the index is rebalanced on a quarterly basis so that each of the 60 constituents is assigned an equal weight.
“The Canadian stock market is heavily concentrated amongst a handful of stocks in three sectors: financials, energy and materials. An equal weight approach tends to reduce the heavy weightings to the largest stocks in the index and provide greater sector diversification,” says Howard Atkinson, president of Horizons ETFs. “Generally speaking, greater diversification is a good thing for a portfolio, since we know that the performance of certain sectors and stocks will vary in different market conditions. The quarterly rebalance feature of the Index reduces positions in stocks that have gone up the most and reallocates those proceeds to stocks that have lagged. In effect, the equal weight index sells high and buys low.”
