Canadian traders can soon amplify their exposure to cannabis-related exchange-traded funds (ETFs) via leveraged fund plays. Horizons ETFs Management (Canada) Inc. announced the launch of the BetaPro Marijuana Companies 2x Daily Bull ETF (HMJU) and the BetaPro Marijuana Companies Inverse ETF (HMJI).
Units of the ETFs will begin trading Friday, May 24, 2019 on the Toronto Stock Exchange (TSX) under the ticker symbols HMJU and HMJI, respectively.
HMJU and HMJI are different from most other ETFs. As BetaPro funds, they are designed to provide daily investment results by employing leverage and short exposure beyond the limits prescribed for conventional mutual funds. These characteristics make them riskier than funds that do not employ these mechanisms and make them more suitable for sophisticated investors. Horizons ETFs is the only provider of leveraged, inverse and inverse leveraged ETFs in Canada.
The management fee for HMJU and HMJI will be 1.45%, plus applicable sales taxes.
“Since we introduced HMMJ in 2017, thousands of Canadian investors have approached us and expressed their wish for leveraged and inverse exposure to the Canadian cannabis sector,” said Mr. Hawkins. “Until now, generating leveraged and inverse exposure to marijuana equities has been difficult and typically requires using a margin account and securities lending facilities. HMJU and HMJI streamline this process and allow investors to get leverage and inverse access through diversified ETF exposure to the sector, rather than taking on individual stock risk or having to using a margin account.”
It is important to note that while HMJI reduces the unlimited risk typical of shorting marijuana equities, as losses in HMJI cannot exceed the principal investment amount, HMJI does not eliminate the borrowing costs of shorting marijuana equities. The securities lending costs of shorting marijuana equities will be reflected in the performance of HMJI.
Although the hedging costs of HMJI are assessed on a monthly basis to reflect then-current market conditions, these hedging costs are expected to materially reduce the returns of HMJI to unitholders and to materially impair the ability of the ETF to meet its investment objectives. Currently, Horizons ETFs anticipates that, in respect of HMJI, based on existing market conditions, the hedging costs charged to HMJI and indirectly borne by Unit holders will be between 15.00 percent and 35.00 percent per annum of the aggregate notional exposure of HMJI’s Forward Documents.
Horizons ETFs will publish an updated fixed hedging cost for each month at the beginning of that month at www.HorizonsETFs.com.
The Underlying Index is calculated and published by Solactive AG. The guidelines for the Index, as well as the initial list of constituents, can be found on Solactive AG’s website here.
