Horizons ETFs launches tax-efficient Nasdaq-100 ETF on Toronto Exchange

Apr 21st, 2016 | By | Category: Equities

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Canadian exchange-traded fund provider Horizons ETFs has launched the Horizons Nasdaq-100 Index ETF (HXQ), providing investors with low-cost, tax-efficient exposure to 100 of the largest US and international non-financial companies listed on Nasdaq Exchange.

Horizons ETFs unveils Nasdaq-100 ETF on Toronto Stock Exchange

The Horizons Nasdaq-100 Index ETF (HXQ) provides access to the total return of the Nasdaq 100 Index, a tech-heavy reference for large cap US equities.

The ETF has been listed on the Toronto Stock Exchange in both Canadian and US dollars. The fund tracks the performance of the Nasdaq 100 Index (Total Return).

The ETF uses a synthetic (swap-backed) replication structure to receive the pre-tax total return of the index. Tracking error is reduced in the total return index ETF since there are no portfolio trading costs.

Similarly, unlike in physically-replicated ETFs, no distributions are expected to be paid by the ETF. Instead, the value of the dividend or interest income is directly reflected in the performance of the ETF. This is intended to enable greater tax efficiency for investors who hold the ETF in non-registered investment accounts. Non-registered accounts are a type of investment account that allows Canadian citizens to save money for the long term. Tax is only levied on the capital gains realized inside the account at 50% of the account holder’s top marginal tax rate. There is also no contribution limit.

Steve Hawkins, Co-CEO, Horizons ETFs, commented: “The NASDAQ-100 is an investor’s main index for exposure to some of the world’s largest and most well-known brand names, like Apple, Facebook, Google and Microsoft. Using our innovative TRI structure, HXQ investors can now receive the total return of these important growth stocks. This creates the potential for greater compounded after-tax returns versus other NASDAQ-100 ETFs, as HXQ is not exposed to the same withholding taxes for holding the index constituents directly.”

As of 21 April 2016, the index is significantly exposed to the technology (52.9%), consumer services (23.9%), and health care (12.7%) sectors. The fund has a total expense ratio of 0.25% and a swap fee of no more than 0.375%.

Horizons ETFs currently has more than $6bn of assets under management and has 73 ETFs listed on the Toronto Stock Exchange.

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