Horizons Active Floating Rate Bond ETF - HFR

ETF Overview

The investment objective of the fund is to generate income that is consistent with prevailing short-term corporate bond yields while stabilizing the market value of the ETF from the effects of interest rate fluctuations.

The ETF invests in a portfolio of Canadian debt securities and hedges the portfolio's interest rate risk to generally maintain a portfolio duration of less than two years.

The ETF may use derivatives, include interest rate swaps, to deliver a floating rate of income.

The ETF seeks to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times.

To achieve the ETF's investment objectives, the Sub-Advisor uses fundamental credit research to select companies that, based on the Sub-Advisor's view on the company's industry and growth prospects, are believed to offer attractive risk adjusted returns.

The Sub-Advisor seeks diversification by industry sector and geographic region and relies on its: in-depth fundamental credit research, view of market trends, analysis of the company's competitive position, and review of the return relative to the company's risk and general market conditions, to select securities for the ETF's portfolio.

Active Management

This fund has an active management mandate ( A minority of ETFs have an active investment management mandate or a degree of active investment management. Full active management involves an investment manager actively managing the fund - deciding which securities to buy/sell, and when etc. However, many 'active' ETFs employ only partial active investment management, not full. ), not passive ( Most ETFs are passively managed - they have no active investment management. Passive ETFs simply try to replicate the returns of an index as closely as possible, such as the S&P/TSX 60 Index. ).

The fund's benchmark ( Most actively managed funds have a benchmark. The fund manager typically aims to exceed the performance of that benchmark. ) is:

Not specified

Key ETF Data

Fundamentals
Category (main)	Active Canadian Fixed Income Floating Rate bonds: Corporate (investment grade)
Category (other)	Corporate Floating Rate bonds
Underlying Index	No Index
ETF Structure	Active management. No index
Asset Class	Fixed Income - Corporate (investment grade) Floating Rate bonds
Region	Canada
Issuer	Horizons ETFs (Canada)
ETF Home Page	Available here

Fund Facts
Inception Date	Dec 10, 2019
Total Holdings	Unknown
Distribution Frequency	Monthly
Leverage	None
Significant Currency Exposure	Some (maybe)
Currency Hedging	Yes

Fees
Management Fee	0.40%
Management Expense Ratio (MER)	0.45% *

* 2011 MER, 2010 (0.43%)

Trading Information
Ticker	HFR
Exchange	TSX (Toronto Stock Exchange)
Currency	CAD

Eligibility
Eligibility *	RRSP, RRIF, RESP, TFSA, DPSP, RDSP
DRIP available **	Yes
PACC Plan available **	Yes
SWP available **	Yes

* Always check eligibility with your plan operator as plans and accounts can differ

** Not all brokers can facilitate these plans. Check with your broker.

Current Price, Fund Performance, Yield, NAV, Charts etc

To view the TSX or Morningstar fund page for this ETF click on the Fund Data menu tab or below:

ETF Analysis

Bonds/fixed income funds should be an important component in most investment portfolios. The general rule of thumb is that you should have the percentage equivalent in bonds as per your age. So if you are 30, your portfolio should comprise 30% bonds/fixed income funds.

However the bond markets are in near unprecedented territory. Years of central bank stimulus packages and ultra-low interest rates since 2008's Financial crisis have created a massive bubble.

Many analysts including Peter Boockvar, managing director and chief market analyst at The Lindsey Group, agree. He stated in July 2016 that the bond market is in an ‘epic bubble of colossal proportions’.

Until the buddle bursts, we cannot recommend buying bonds/fixed income funds.

If you absolutely have to buy bonds/fixed income funds then ensure you always check the Yield To Maturity (YTM), also known as the Weighted Average Yield To Maturity.

The YTM is much more important than the bond's current yield (also called the current distribution yield).

The YTM (unlike current yield) considers not only the coupon income, but any capital gain or loss that an investor will realize by holding the bonds to maturity. It also considers reinvestment of the coupons.

Unfortunately the frothy bond market has meant many fixed income ETFs have had to purchase many bonds at a premium. An ultra-low rate environment and purchasing bonds at a premium makes for a particularly terrible climate for income seekers, and new fixed income investors.

Protect yourself by understanding YTM and checking the YTM of any fixed income security you are considering purchasing. Also understand quality ratings, duration and maturities.

Be particularly aware of fund fees. What is the fund's MER ()? An MER of 0.40% may not sound like much but fixed income funds are supposed to be less risky than equities (bond market bubbles such as the current one excepted) so their returns are typically considerably less. Consequently an MER of 0.40% may actually be a significant portion of any investment return from a bond/fixed income fund. Bond ETFs with sub 0.20% MERs are available.