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Research Department

October-04-10

A New S&P/TSX60 Index ETF

Horizon BetaPro has recently announced the launch of a new S&P/TSX60 ETF with a very appealing 0.07% Management fee, which compares favorably to a 0.17% MER for the iShares S&P/TSX60 ETF. The Canadian Capitalist blog does a reasonable job of highlighting the important differences between the iShares product and the new Horizon product. A key point is that the latter does not actually hold the common stocks that constitute the index: it rather holds a combination of a Total Return Swap on the S&P/TSX60 Index and money market securities. In addition to the complexity and the counterparty risk involved in this new investment vehicle, it should be noted that holders are going to bear the credit risk of the money market securities held by the fund. I think investors should understand these differences and their implications before investing in the Horizon product.

By: Raymond Kerzérho | 0 comments