Horizons ETFs has launched two new thematic equity ETFs on Toronto Stock Exchange.
Steve Hawkins, President and CEO of Horizons ETFs.
The Horizons Global Vaccines and Infectious Diseases Index ETF (HVAX CN) provides exposure to companies worldwide that are focused on combatting infectious diseases, while the Horizons North American Infrastructure Development Index ETF (BLDR CN) targets US and Canadian firms involved in infrastructure projects.
The funds capture opportunities related to two areas receiving significant attention in the news and generating considerable market interest.
The Covid-19 pandemic has greatly boosted the prominence of infectious diseases and highlighted the importance of diagnostics, therapeutics, and vaccine development.
Meanwhile, the Biden administration’s ‘Build Back Better’ agenda is pledging billions of dollars toward renewing and upgrading US infrastructure, including significant developments within the clean energy space.
Steve Hawkins, President and CEO of Horizons ETFs, commented: “As a leading provider of thematic ETFs in Canada, we are proud to once again offer investors access to two of the most important themes of today. Thematic ETFs, like HVAX and BLDR, provide one-stop access to long-term trends with significant growth potential. There has never been an easier time to harness thematic ETFs and get exposure to the sectors driving the future forward.”
Each ETF comes with an expense ratio of 0.60% and will generally hedge US dollar exposure back to Canadian dollars.
Vaccines and Infectious Diseases
The Horizons Global Vaccines and Infectious Diseases Index ETF tracks the Solactive Global Vaccines and Infectious Diseases Index which selects its constituents from a universe of developed market stocks with market capitalizations above $1bn and average daily trading volumes greater than $2m.
Security selection is driven by ARTIS, Solactive’s proprietary natural language processing algorithm, which identifies firms linked to a specific theme by screening for related keywords in a company’s publicly available documents.
With reference to the vaccines and infectious diseases theme, ARTIS identifies companies with business operations linked to the development, manufacture, and distribution of vaccines and related therapeutics; the treatment of various types of infectious diseases; research covering prophylactics, therapeutics, and vaccines for the treatment and prevention of novel viruses and highly transmissible diseases; and the development and distribution of diagnostics and testing equipment for highly transmissible diseases.
The index targets 30 constituents with the highest ARTIS thematic scores. Constituents are weighted using a relatively complex formula that essentially assigns greater weight to companies with higher ARTIS scores. The company with the highest ARTIS score receives a weight of 5.67% and the firm with the lowest ARTIS score receives a weight of 0.99%.
Over two-thirds (69.8%) of the index is allocated to stocks from the US with the next-largest country exposures being France (12.4%) and the UK (9.3%).
Hawkins said: “The onset of the Covid-19 outbreak challenged many assumptions about pandemic readiness and, subsequently, spurred hundreds of billions of dollars in vaccine development and acquisition spending, enriching the life sciences and pharmaceutical companies behind their development and manufacture.
“As countries equip themselves and their populations against future pandemics, it is clear that the companies leading the fight against these infectious threats are well-positioned for continued long-term growth and revenue expansion.”
Infrastructure
The Horizons North American Infrastructure Development Index ETF, meanwhile, tracks the Solactive North American Infrastructure Development Index which selects its constituents from a universe of US or Canada-listed stocks, excluding American Depository Receipts, of companies with market capitalizations above $300m and average daily trading volumes greater than $1m.
The index harnesses FactSet’s Revere Business Industry Classification System (RBICS) to select 50 stocks across seven infrastructure-related industry categories.
The methodology selects the largest stocks while ensuring a minimum number of companies, including at least one Canada-listed firm, is chosen from each index category.
The seven index categories are transportation infrastructure construction (minimum of 4 companies), transportation operators (3), telecommunication infrastructure (3), water and energy infrastructure (4), infrastructure materials and components (6), infrastructure construction (6), and construction machinery (4).
Constituents are weighted by market capitalization while capping the weight of any single company at 10% and ensuring the cumulative weight of Canada-listed firms is at least 20%.
Approximately three-quarters of the index weight is currently allocated to US stocks with the remainder in Canadian companies.
Hawkins commented: “The twin challenges of aging infrastructure and the need for climate change resiliency means that infrastructure investment has never been more critical for the future of North America. Thankfully, both the US and Canadian governments are taking action.
“The US’s Infrastructure Investment and Jobs Act, which pledges over $500bn towards renewing and creating physical, transit, and utility infrastructure, will require millions of workers, creating an unprecedented investment opportunity that could benefit both investors and the broader economy.”