ETF Sage
Canadian ETF knowledgebase
ETF Sage
Canadian ETF knowledgebase
The investment objective of the fund is to generate income that is consistent with prevailing U.S. short-term corporate bond yields while stabilizing the market value of the ETF from the effects of U.S. interest rate fluctuations.
The ETF invests primarily in a portfolio of U.S. corporate debt securities and will hedge the portfolio's U.S. interest rate risk to generally maintain a portfolio duration of less than two years.
The ETF may also invest in U.S government debt securities and debt securities of non-U.S. companies. The ETF may also invest in debt securities directly, or through investments in securities of other investment funds, including exchange traded funds.
The ETF will use derivatives, including interest rate swaps, to deliver a floating rate of income.
As the ETF is denominated in U.S. dollars, the ETF will generally seek to hedge its Canadian dollar currency exposure to the U.S. dollar and will not seek to hedge its U.S. dollar currency exposure to the Canadian dollar.
The ETF trades in U.S. dollars on the TSX.
The ETF will initially enter into one or more interest rate swaps pursuant to which the ETF will pay a counterparty a fixed return based on a portfolio of fixed income securities in exchange for a floating rate of income, with a portfolio duration that is generally not more than two years.
The Sub-Advisor may, from time to time, invest in non-investment grade debt, U.S., Canadian and foreign government debt, exchange traded funds, cash and cash equivalents which generally in aggregate will not exceed 40% of the ETFs net assets.
The Sub-Advisor may sell short debt securities it believes will underperform on a relative basis or to otherwise assist the ETF in meeting its investment objectives.
In lieu of specific security selections, from time to time the Sub-Advisor may purchase fixed income related exchange traded funds including those managed by AlphaPro and its affiliate Horizons ETFs Management (Canada) Inc.
The ETF may also use both long and short derivative instruments, including future contracts and credit default swaps, to manage duration, credit exposure, portfolio yield, and market risk.
This fund has an active management mandate (
), not passive ().
The fund's benchmark () is:
| Fundamentals | |
|---|---|
| Category (main) | Active USA Fixed Income Floating Rate bonds: Corporate (mostly investment grade) |
| Category (other) | Corporate Floating Rate bonds |
| Underlying Index |
No Index |
| ETF Structure | Active management. No index |
| Asset Class |
Fixed Income |
| Sub-Asset Class | Corporate (mostly investment grade) Floating Rate bonds |
| Region |
USA |
| Issuer | Horizons ETFs (Canada) |
| ETF Home Page | Available here |
| Fund Facts | |
|---|---|
| Inception Date | Feb 15, 2012 |
| Total Holdings |
Unknown |
Distribution Frequency  |
Monthly |
| Leverage |
None |
| Significant Currency Exposure
|
Yes |
| Currency Hedging
|
Yes |
| Fees | |
|---|---|
| Management Fee |
0.40% |
| Management Expense Ratio (MER) |
Unknown * |
* Not available yet
| Trading Information | |
|---|---|
| Ticker | HUF.U |
| Exchange |
TSX (Toronto Stock Exchange) |
| Currency |
USD * |
* Trades in USD.
| 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.
To view the TSX or Morningstar fund page for this ETF click on the Fund Data menu tab or below:
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.