Horizons ETFs Management (Canada) has launched the Horizons Euro Stoxx 50 Index ETF, which the company says will provide investors with low-cost, tax-efficient exposure to the performance of 50 of the largest, sector-leading companies in Europe.
The ETF is now trading on the Toronto Stock Exchange (TSX) under the ticker symbol HXX.
HXX seeks to replicate the performance of the Euro Stoxx 50 Futures Roll Index (Total Return), net of expenses. The Euro Stoxx 50 Futures Roll Index (Total Return) is designed to reflect the returns generated, over time, through notional investments in a long position in a series of futures contracts on the Euro Stoxx 50 Index.
Currently, there are no other Canadian ETFs that track this index. The introduction of HXX also represents the first time that a Canadian ETF provider has licensed an index from Stoxx Ltd to provide exposure to the Euro Stoxx 50 Index – its most widely followed index strategy.
The Euro Stoxx 50 is a blue-chip index for the 19 European Union countries that have adopted the Euro as their currency. It currently covers 50 stocks from 19 super-sectors in 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
HXX uses Horizons ETFs' total return index (TRI) structure to provide tax-efficient exposure to the total return of the Euro Stoxx 50 Futures Roll Index.
TRI ETFs are low-cost, index-replicating ETFs that use a synthetic replication structure to receive the pre-tax total return of an index. Unlike physically-replicated ETFs, no distributions are expected to be paid by the ETF. Instead, the value of any dividend or interest income is directly reflected in the performance of the ETF. This leads to greater tax efficiency for investors who hold the ETF in non-registered investment accounts. In addition, tracking error is also reduced in TRI ETFs since there are no portfolio trading costs.
"The Euro Stoxx 50 provides exposure to some of Europe's largest and most well-known brand names, including Anheuser-Busch InBev, Bayer, BASF and Daimler," says Steve Hawkins, president and co-CEO of Horizons ETFs. "Using our innovative TRI structure, HXX investors will get exposure to the total return of these sector-leading European stocks. European stocks currently offer higher dividends on average than would currently be earned on similar North American stocks. Taxes, which include foreign withholding tax, eliminate a lot of the yield advantage of these stocks. HXX's unique TRI structure largely eliminates immediate taxation of these distributions which should result in a better after-tax return for holders of HXX versus other Canadian-listed European equity index ETFs."