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Horizons ETFs launches tax-efficient Canadian Preferred Share ETF

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Horizons ETFs Management has launched the Horizons Laddered Canadian Preferred Share Index ETF (HLPR), which is nor trading on the Toronto Stock Exchange (TSX) under the ticker symbol HLPR.

HLPR is the latest addition to the Horizons Total Return Index ETF (Horizons TRI ETFs) suite. Horizons TRI ETFs use an innovative ‘total return swap’ investment structure designed to deliver returns in a low-cost and tax-efficient manner. The addition of HLPR brings the Horizons TRI ETF suite to a total of 15 ETFs – broadening the variety of strategies offered in Canada’s only portfolio of tax-advantaged ETFs.
 
HLPR seeks to replicate, to the extent possible, the performance of the Solactive Laddered Canadian Preferred Share Index (Total Return), net of expenses. The Index composition is made up entirely of Canadian preferred shares that generally have an adjustable dividend rate. The Index is already well established in Canada as it has the most preferred share ETF assets in the nation benchmarked against it.
 
Generally issued by large, well-established companies, preferred shares are securities that exhibit characteristics of both bonds and equities. Like bonds, preferred shares pay a fixed or adjustable dividend over a set term – but also have the potential for price appreciation (or decline), like a stock. The shares are ‘preferred’ because they have a claim on income and assets that is senior to that of common shareholders.
 
Similar to other Horizons TRI ETFs, HLPR is not expected to pay any taxable distributions. While the underlying preferred shares in the Index pay a dividend, HLPR uses a synthetic structure where the value of any dividend payments in the Index are reflected in the net asset value of the ETF, but never typically paid out.  
 
Outside of its TRI suite, Horizons ETFs also offers the Horizons Active Preferred Share ETF (HPR) – the largest actively managed preferred share ETF in Canada by assets under management (currently at USD1.53 billion).
 
“ETFs have been a popular strategy for investors seeking access to preferred shares because they offer a one-ticket solution to the complexities and illiquidity of investing in this asset class,” says Steve Hawkins, President and CEO of Horizons ETFs. “With HPR, Horizons ETFs has already established itself as a leading provider of preferred share ETF solutions in the Canadian marketplace. HLPR is simply a new preferred share offering that is well-suited in taxable accounts, since it is not expected to pay out any taxable distributions.”
 
Timo Pfeiffer, Head of Research at Solactive, says: “Preferred share ETFs are very popular investment vehicles in Canada, and we are quite pleased with being chosen as the index provider for this significant ETF release.”
 

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