That’s Why We Created the Horizons Total Return Index (TRI) ETF Suite
Over time, regular investment funds can pay dividends or interest, providing yield, and may appreciate in value.
However, distributions from those investment funds are generally taxable events for investors, and the resulting tax liability can reduce an investor’s potential total return.
Horizons ETFs believes that investors should be able to access passive index strategies in the most cost and tax-efficient way possible.
Unique to the Canadian ETF landscape, Horizons Total Return Index (TRI) ETFs collectively offer tax-efficient exposure to 19 different indices and asset classes, enabling investors to access the total return on their investment as long as they remain invested.
Who Should Consider Horizons ETFs Corporate Class?
Canadian investors that have already made the maximum allowable contributions to their registered investment accounts and tax-free savings accounts (TFSAs) who are seeking to invest more, will likely have to do so through a non-registered account. Unlike registered accounts and TFSAs, non-registered accounts generally don’t provide the same taxation benefits and require you to pay taxes on any distributions you’ve received on an annual basis. As the Horizons TRI ETFs are not expected to make distributions, an investor is generally only expected to be taxed on any capital appreciation when their shares of the ETF are sold.
If you’re a small business owner looking to invest with your corporate account, it’s important to know that passive investment income can reduce your Small Business Deduction (SBD) tax credit, at a rate of $5 for every $1 of investment income above the $50,000 threshold. Horizons TRI ETFs offer small business owners a way to potentially grow their corporate account portfolios without negatively affecting their SBD tax credit.
For seniors receiving Old Age Security (OAS), “clawback” on OAS payments can occur if the individual is receiving income, including dividend income, greater than $77,580 (2019). With Horizons TRI ETFs, constituent distributions are instead reflected as part of the ETF’s total return. This means that seniors seeking to ensure their OAS payments aren’t impacted by the income they receive from their investments can alternatively consider using our Horizons TRI ETFs.
For those investing for minor dependents or relatives through an in-trust account, it’s important to know that
in-trust investments are typically subject to income attribution, meaning the onus to pay taxes on the income the trust generates will be on the contributor to the trust rather than the beneficiary of the trust. However, this doesn’t apply to capital gains. As the Horizons TRI ETFs are not expected to make distributions, an investor is generally only expected to be taxed on any capital appreciation when their shares of the ETF are sold.
Corporate Class
Total Return Index ETF List
0.07% rebated by 0.03% to an effective management fee of 0.04%, until at least December 31, 2022 (plus applicable sales taxes)
HXT seeks to replicate, to the extent possible, the performance of the S&P/TSX 60TM Index (Total Return), net of expenses. The S&P/TSX 60TM Index (Total Return) is designed to measure the performance of the large-cap market segment of the Canadian equity market.
MORE DETAILSPlus applicable sales taxes
HXH seeks to replicate, to the extent possible, the performance of the Solactive Canadian High Dividend Yield Index (Total Return), net of expenses. The Solactive Canadian High Dividend Yield Index (Total Return) is designed to measure the performance of Canadian-listed equity securities characterized by high dividend yield.
MORE DETAILSPlus applicable sales taxes
HXE seeks to replicate, to the extent possible, the performance of the S&P/TSX Capped Energy Index (Total Return), net of expenses. The S&P/TSX Capped Energy Index (Total Return) is designed to measure the performance of Canadian energy sector equity securities included in the S&P/TSX Composite Index. The relative weight of any single index constituent security is capped.
MORE DETAILSPlus applicable sales taxes
HXF seeks to replicate, to the extent possible, the performance of the S&P/TSX Capped Financials Index (Total Return), net of expenses. The S&P/TSX Capped Financials Index is designed to measure the performance of Canadian financial sector equity securities included in the S&P/TSX Composite Index. The relative weight of any single index constituent security is capped.
MORE DETAILSPlus applicable sales taxes
HEWB seeks to replicate, to the extent possible, the performance of the Solactive Equal Weight Canada Banks Index (Total Return), net of expenses. The Solactive Equal Weight Canada Banks Index (Total Return) is an equal weight index of equity securities of diversified Canadian banks.
MORE DETAILSPlus applicable sales taxes
HCRE seeks to replicate, to the extent possible, the performance of the Solactive Equal Weight Canada REIT Index (Total Return), net of expenses. The Solactive Equal Weight Canada REIT Index (Total Return) is an equal weight index of Canadian-listed real estate investment trust equity securities.
MORE DETAILSPlus applicable sales taxes
HXCN seeks to replicate, to the extent possible, the performance of the S&P/TSX Capped Composite Index (Total Return) (the “Index”), net of expenses. The Index is designed to measure the performance of the broad large-cap market segment of the Canadian equity market, with a capped weight of 10% on all constituent issuers.
MORE DETAILSPlus applicable sales taxes
HXS seeks to replicate, to the extent possible, the performance of the S&P 500® Index (Total Return), net of expenses. The S&P 500® Index (Total Return) is designed to measure the performance of the large-cap market segment of the U.S. equity market.
MORE DETAILSPlus applicable sales taxes
HSH seeks to replicate, to the extent possible, the performance of the S&P 500® CAD Hedged Index (Total Return), net of expenses. The S&P 500® CAD Hedged Index (Total Return) is designed to measure the performance of the large-cap market segment of the U.S. equity market, hedged to the Canadian dollar.
MORE DETAILSPlus applicable sales taxes
This ETF uses a physical portfolio.
HXQ seeks to replicate, to the extent possible, the performance of the NASDAQ-100® Index (Total Return), net of expenses. The NASDAQ-100® Index (Total Return) includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market.
MORE DETAILSPlus applicable sales taxes
HXDM seeks to replicate, to the extent possible, the performance of the Horizons EAFE Futures Roll Index (Total Return), net of expenses. The Horizons EAFE Futures Roll Index (Total Return) is designed to measure the performance of large and mid-cap securities across 21 developed markets including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada.
MORE DETAILSPlus applicable sales taxes
HXEM seeks to replicate, to the extent possible, the performance of the Horizons Emerging Markets Futures Roll Index (Total Return) (the “Index”), net of expenses. The Index is designed to measure the performance of large- and mid-cap securities across 26 emerging markets countries
MORE DETAILSPlus applicable sales taxes
Horizons HXX seeks to replicate, to the extent possible, the performance of the Solactive Europe 50 Rolling Futures Index (Total Return), net of expenses. The Solactive Europe 50 Rolling Futures Index (Total Return) is designed to measure the performance of 50 of the largest companies that are sector leaders in the Eurozone.
MORE DETAILSPlus applicable sales taxes
This ETF uses a physical portfolio.
HULC seeks to replicate, to the extent possible, the performance of the Solactive US Large Cap Index (CA NTR) (the “Index”), net of expenses. The Index is designed to measure the performance of the large-cap market segment of the U.S. equity market.
MORE DETAILSPlus applicable sales taxes
This ETF uses a physical portfolio
HSUV.U seeks to generate modest capital growth by investing primarily in high interest U.S. dollar deposit accounts with Canadian banks. While any decision to pay dividends or other distributions is within the discretion of the Manager, HSUV is not currently expected to make any regular distributions.
MORE DETAILSPlus applicable sales taxes
HLPR seeks to replicate, to the extent possible, the performance of the Solactive Laddered Canadian Preferred Share Index (Total Return), net of expenses. The Solactive Canadian Preferred Share Index (Total Return) is an index of Canadian preferred shares that generally have an adjustable dividend rate.
MORE DETAILSPlus applicable sales taxes
HBB seeks to replicate, to the extent possible, the performance of the Solactive Canadian Select Universe Bond Index (Total Return), net of expenses. The Solactive Canadian Select Universe Bond Index (Total Return) is designed to measure the performance of the Canadian investment-grade fixed income market. The ETF uses derivatives, such as a swap agreement or multiple swap agreements, to obtain exposure to its underlying index without investing directly in the securities that make up its underlying index.
MORE DETAILSPlus applicable sales taxes
HTB seeks to replicate, to the extent possible, the performance of the Solactive US 7-10 Year Treasury Bond Index (Total Return), net of expenses. The Solactive US 7-10 Year Treasury Bond Index (Total Return) is designed to measure the performance of the US 7-10 Year Treasury Bond market. The ETF uses derivatives, such as a swap agreement or multiple swap agreements, to obtain exposure to its underlying index without investing directly in the securities that make up its underlying index.
MORE DETAILS0.18% rebated by 5 BPS (0.05%) to an effective management fee of 13 BPS, or 0.13%, effective April 15, 2022, until further notice (Plus applicable sales tax).
This ETF uses a physical portfolio.
HSAV seeks to generate modest capital growth by investing primarily in high interest deposit accounts with Canadian banks. While any decision to pay dividends or other distributions is within the discretion of the Manager,HSAV is not currently expected to make any regular distributions.
MORE DETAILSPlus applicable sales taxes
HARB seeks to provide positive absolute returns with low volatility over a market cycle regardless of market conditions or general market direction. The ETF will tactically take long and short positions in North American and global debt instruments and derivatives across the credit spectrum.
MORE DETAILSPlus applicable sales taxes
HARC seeks to generate positive absolute returns through long and short exposure to selected global currencies. HARC will generally hold Canadian short-term fixed-income securities and will primarily use derivative instruments to gain its exposure to selected global currencies.
MORE DETAILSPlus applicable sales taxes
HRAA is an alternative fund whose investment objective is to seek long-term capital appreciation by investing, directly or indirectly, in major global asset classes, including, but not limited to: equity indices, fixed income indices, interest rates, commodities and currencies. HRAA gains exposure to these asset classes by investing in derivative instruments that may include futures contracts and forward agreements, and securities.
MORE DETAILSThe Canadian ETF universe has a large variety of traditional, physically-replicated benchmark or index products that can offer investors comparatively low-cost exposure to major indices and benchmarks. However, distributions from these investment funds are generally taxable events for investors. These taxable distributions can reduce an investor’s potential after-tax return, when compared to the potential after-tax return on investment from owning a comparable Horizons TRI ETF.
For illustrative purposes only.
The major difference between the Horizons TRI ETFs and other corporate class funds is that our ETFs primarily hold derivatives to achieve their investment returns, although physically-replicated Index and benchmark ETFs are also held within Horizons ETF Corp.
Within Horizons ETF Corp., the Horizons TRI ETFs offer distinct tax efficiencies for investors. The tax-efficiency to investors is primarily achieved through our proprietary, synthetic Total Return structure, which is used by most of the Horizons TRI ETFs. There are also tax efficiencies realized by Horizons ETF Corp. itself, when compared to a mutual fund trust structure, since the corporation can use widely accepted corporate tax accounting options, such as the ability to use losses and expenses to offset income across all classes.
The majority of Horizons TRI ETFs utilize a synthetic structure, known as a total return swap.
Unlike a traditional physical replication ETF that typically purchases the securities found in the relevant index in the same proportions as the index, most Horizons TRI ETFs use a synthetic structure that never buys the securities of an index directly. Instead, these synthetic-exposure based Horizons TRI ETFs receive the total return of the relevant index by entering into Total Return Swap agreements with one or more counterparties, typically large Canadian financial institutions, which provide the ETFs with the total return of the relevant index.
The Horizons TRI ETFs that utilize total return swaps achieve tax-efficiency primarily by receiving the total return of the underlying index (before fees) – the value of the underlying index constituent distributions get reflected in the ETF’s share price and are not distributed to shareholders. This means that an investor is generally only expected to be taxed on any capital appreciation of their ETF shares if, and when, their shares of the ETF are sold. To gain exposure to certain indices through a total return swap, counterparties may charge the Horizons TRI ETF a swap fee (depending on the underlying asset). The Horizons TRI ETFs that provide exposure to foreign equities and fixed income securities will typically be charged a swap fee. None of the Horizons TRI ETFs that provide exposure to Canadian equities and preferred shares currently have a swap fee associated with their total return swap.
To understand how this works, download our Corporate Class Brochure for more information.
The Canadian ETF universe has a large variety of traditional, physically-replicated benchmark or index products that can offer investors comparatively low-cost exposure to major indices and benchmarks. However, distributions from these investment funds are generally taxable events for investors. These taxable distributions can reduce an investor’s potential after-tax return, when compared to the potential after-tax return on investment from owning a comparable Horizons TRI ETF.
For illustrative purposes only.
The major difference between the Horizons TRI ETFs and other corporate class funds is that our ETFs primarily hold derivatives to achieve their investment returns, although physically-replicated Index and benchmark ETFs are also held within Horizons ETF Corp.
Within Horizons ETF Corp., the Horizons TRI ETFs offer distinct tax efficiencies for investors. The tax-efficiency to investors is primarily achieved through our proprietary, synthetic Total Return structure, which is used by most of the Horizons TRI ETFs. There are also tax efficiencies realized by Horizons ETF Corp. itself, when compared to a mutual fund trust structure, since the corporation can use widely accepted corporate tax accounting options, such as the ability to use losses and expenses to offset income across all classes.
The majority of Horizons TRI ETFs utilize a synthetic structure, known as a total return swap.
Unlike a traditional physical replication ETF that typically purchases the securities found in the relevant index in the same proportions as the index, most Horizons TRI ETFs use a synthetic structure that never buys the securities of an index directly. Instead, these synthetic-exposure based Horizons TRI ETFs receive the total return of the relevant index by entering into Total Return Swap agreements with one or more counterparties, typically large Canadian financial institutions, which provide the ETFs with the total return of the relevant index.
The Horizons TRI ETFs that utilize total return swaps achieve tax-efficiency primarily by receiving the total return of the underlying index (before fees) – the value of the underlying index constituent distributions get reflected in the ETF’s share price and are not distributed to shareholders. This means that an investor is generally only expected to be taxed on any capital appreciation of their ETF shares if, and when, their shares of the ETF are sold. To gain exposure to certain indices through a total return swap, counterparties may charge the Horizons TRI ETF a swap fee (depending on the underlying asset). The Horizons TRI ETFs that provide exposure to foreign equities and fixed income securities will typically be charged a swap fee. None of the Horizons TRI ETFs that provide exposure to Canadian equities and preferred shares currently have a swap fee associated with their total return swap.
To understand how this works, download our Corporate Class Brochure for more information.
Performance Comparison Between a Horizons TRI Bond ETF and a Traditional Index Bond ETF
Performance Comparison Between a Horizons TRI Bond ETF and a Traditional Index Bond ETF
Horizons TRI ETFs have the potential to provide a greater after-tax return on investment when held in a non-registered account, compared to a traditional, physically-replicated index ETF. As an illustrative example only, assuming no move in market value and a 3% annual distribution, paid quarterly, on an initial investment of $1 million, our Horizons TRI ETFs’ tax-efficient strategy could generate as much as $77,463 in after-tax savings over a 10-year period, for an Ontario investor in the highest marginal tax bracket. It is important to note that no Horizons TRI ETFs re-characterize investment income as capital gains.
Get the Total Return
The Horizons ETFs family includes a broadly diversified range of investment tools to help investors of all experience levels meet investment objectives in a variety of market conditions.
Get the total return on your investments with Horizons Total Return Index ETFs. Find out more by subscribing to Horizons Corporate Class updates today.