Futures contracts on the Horizons Marijuana Life Sciences
Index ETF (HMMJ) begin trading today.
TORONTO, June 18, 2018 /CNW/ - Horizons ETFs Management
(Canada) Inc. ("Horizons
ETFs" or the "Manager") is pleased to announce new
developments with its suite of Marijuana-focused exchange traded
funds ("ETFs"). This includes the listing of futures
contracts on the Horizons Marijuana Life Sciences Index ETF
("HMMJ") and the filing of a preliminary prospectus to
launch leveraged, inverse and inverse leveraged ETFs that provide
exposure to Canadian-listed Marijuana companies.
Futures on units of HMMJ will begin trading today on the
Montreal Exchange. Futures contracts on HMMJ will be available with
quarterly expiration dates, in January, March, June and September –
initially extending to a June 2019
expiry.
ETF
|
Ticker
|
SSF
Symbol
|
Horizons Marijuana
Life Science Index ETF
|
HMMJ
|
FMJ
|
"We view the formal availability of futures on HMMJ as
recognition by the Canadian investor marketplace that HMMJ is the
key benchmark for Marijuana investing in Canada," said Steve Hawkins, President and Co-CEO of Horizons
ETFs. "For us, this further legitimizes Marijuana-equity
investing and HMMJ as the key way to get broad index exposure to
this rapidly growing sector."
Horizons ETFs also filed a preliminary prospectus last week to
launch three new ETFs (the "New ETFs") that provide
leveraged, inverse and inverse leveraged exposure to
Canadian-listed Marijuana companies as represented by the Solactive
Canadian Marijuana Companies Index. (Note that these preliminary
filings are subject to change and subject to regulatory
approval.)
The Solactive Canadian Marijuana Companies Index (the
"Index") is an index of investable equity securities of
Canadian Marijuana companies that are listed on a Canadian
exchange. The Index is intended to track the price movements in
shares of Canadian companies which are mainly active in the
Marijuana industry. The Index is published in Canadian dollars.
These ETFs will be branded under Horizons ETFs' family of
tactical BetaPro ETFs.
The proposed investment objective for each respective ETF is as
follows:
BetaPro Canadian Marijuana Companies 2x Daily Bull ETF
(HMJU): This proposed ETF seeks daily investment results,
before fees, expenses, distributions, brokerage commissions and
other transaction costs, that endeavour to correspond to two times
(200%) the daily performance of the Solactive Canadian Marijuana
Companies Index. The proposed ticker for this ETF is HMJU:TSX.
BetaPro Canadian Marijuana Companies -2x Daily Bear ETF
(HMJD): This proposed ETF seeks daily investment results,
before fees, expenses, distributions, brokerage commissions and
other transaction costs, that endeavour to correspond to two times
(200%) the inverse (opposite) of the daily performance of the
Solactive Canadian Marijuana Companies Index. The proposed ticker
for this ETF is HMJD:TSX.
BetaPro Canadian Marijuana Companies Inverse ETF (HMJI):
This proposed ETF seeks daily investment results, before fees,
expenses, distributions, brokerage commissions and other
transaction costs, that endeavour to correspond to one times (100%)
the inverse (opposite) of the daily performance of the Solactive
Canadian Marijuana Companies Index. The proposed ticker for this
ETF is HMJI:TSX.
"Given the underlying volatility of this sector, we believe
there is demand from certain sophisticated Canadian investors to
take on more risk using leveraged ETFs to attempt to generate
potentially higher short-term returns – very much like they have
done with gold mining stocks," said Mr. Hawkins.
Currently, the Manager anticipates that, in respect of HMJI and
HMJD, based on existing market conditions (particularly, the high
cost of borrowing the securities of Marijuana companies to provide
"short" exposure), the hedging costs incurred by a counterparty and
charged to HMJI or HMJD, as applicable, and indirectly borne by
unitholders, are expected to be material, and will be between 10%
and 25% per annum of the aggregate notional exposure of HMJI or
HMJD's forward documents, as applicable. This means that the
hedging costs incurred by a counterparty may be as high as between
20% and 50% per annum of the net asset value ("NAV") of
HMJD. Additionally, any security imbalances caused by material
rebalances or trading halts can affect the marked-to-market value
of the forward documents negatively on any given day in relation to
the closing level of the underlying index. The hedging costs of
each of HMJI and HMJD can increase, will be assessed on a monthly
basis to reflect then-current market conditions and are expected to
materially impair the ability of HMJI and HMJD to meet their
investment objectives.
"Shorting Marijuana stocks in particular is an expensive and
complex process. If used appropriately, inverse Marijuana ETFs
could be a potentially more liquid and easier way for investors to
get short exposure to Canadian-listed Marijuana stocks while
limiting their risk to what they invested," said Mr. Hawkins.
"It is important to note that these ETFs certainly wouldn't
eliminate many of the risks investors face when shorting Marijuana
stocks, which includes being subject to the high cost of borrowing
Marijuana stocks."
Important Information:
The proposed ETFs are very different from most other exchange
traded funds.
The 2x and -2x ETFs ("Leveraged ETFs") use leverage and
involve a higher level of risk than funds that do not.
The Leveraged ETFs, before fees and expenses, do not and
should not be expected to return two times (i.e., +200%) or two
times the inverse (i.e., -200%), as applicable, the return of their
underlying index (as hereinafter defined) over any period of time
other than daily.
The returns of the Leveraged ETFs over periods longer than
one day will, under most market conditions, differ in amount and
possibly direction from the performance or inverse performance, as
applicable, of their underlying index for the same period. This
effect becomes more pronounced as the volatility of the underlying
index and/or the period of time increases.
The Inverse ETF, before fees and expenses, should not be
expected to return the precise inverse (i.e., -100%) of the return
of its underlying index over any period of time other than
daily.
The returns of any Inverse ETF over periods longer than one
day will, under most market conditions, be in the opposite
direction from the performance of its underlying index for the same
period, and the returns of such Inverse ETF can, based on
historical returns, generally be expected to be substantially
similar to the inverse performance of its underlying index for the
same period. However, the deviation of returns of an Inverse ETF
from the inverse performance of its underlying index can be
expected to become more pronounced as the volatility of the
underlying index, and/or the period of time, increases.
However, the hedging costs incurred by a counterparty reduces
the value of the forward price payable to an ETF under the forward
documents (as defined). Due primarily to the high cost of borrowing
the securities of Marijuana companies, the hedging costs charged to
HMJI and HMJD, and indirectly borne by unitholders, are anticipated
to be material. Although the hedging costs of HMJI and HMJD are
assessed on a monthly basis to reflect then-current market
conditions, these hedging costs are expected to materially reduce
the daily returns of HMJI and HMJD to unitholders and to materially
impair the ability of HMJI and HMJD to meet their investment
objectives, to a substantially greater degree than other leveraged
or inverse ETFs.
The New ETFs will not knowingly be exposed to any companies that
have exposure to the medical or recreational marijuana market in
the United States, or the
recreational Marijuana market in Canada, unless and until such time as it
becomes legal. If a constituent issuer of the underlying index of
the New ETFs becomes delisted from the TSX or TSX Venture Exchange
due to non-compliance by that constituent issuer with the rules and
policies of the exchange, including, without limitation, the
requirement that issuers do not engage in ongoing business
activities that violate U.S. federal law regarding marijuana, such
constituent issuer would be removed from the underlying index of
the New ETFs in accordance with the guidelines of such underlying
index.
However, certain constituent issuers may, without the knowledge
of the Manager, from time to time have a limited degree of exposure
to the medical and/or recreational cannabis industry in certain
U.S. states where cannabis use and/or sale has been legalized by
state law (e.g. Alaska,
California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont (in July), Washington and Washington D.C.), notwithstanding that the
use, possession, sale, cultivation and transportation of cannabis
remains illegal under U.S. federal law. Despite the permissive
regulatory environment regarding cannabis in certain U.S. states,
cannabis continues to be listed as a Schedule I substance under the
U.S. Controlled Substances Act of 1970 (the "U.S. Controlled
Substances Act").
As a result of the conflicting laws between state legislatures
and the federal government regarding cannabis, investments in U.S.
cannabis businesses may be subject to inconsistent regulation and
enforcement. Unless and until the U.S. Congress amends the U.S.
Controlled Substances Act with respect to cannabis, there is a risk
that federal authorities may enforce current U.S. federal law
against businesses operating in the U.S. cannabis industry, which
may adversely affect the market price of any constituent issuers
that have exposure to the U.S. cannabis industry, and therefore the
value of a New ETF. Accordingly, the New ETFs and the constituent
issuers to which they are exposed through the forward documents may
be subject to a higher degree of regulatory oversight and
regulatory action, which may include a restriction on the types of
constituent issuers to which the New ETFs may be exposed at any
time.
About Horizons ETFs Management (Canada) Inc. (www.HorizonsETFs.com)
Horizons ETFs Management (Canada) Inc. is an innovative financial
services company and offers one of the largest suites of exchange
traded funds in Canada. The
Horizons ETFs product family includes a broadly diversified range
of solutions for investors of all experience levels to meet their
investment objectives in a variety of market conditions. Horizons
ETFs has approximately $10 billion of
assets under management and 79 ETFs listed on major Canadian stock
exchanges. Horizons ETFs Management (Canada) Inc. is a member of the Mirae Asset
Global Investments Group.
Horizons ETFs is a Member of Mirae Asset Global Investments.
Commissions, management fees and expenses all may be associated
with an investment in exchange traded products managed by Horizons
ETFs Management (Canada) Inc. (the
"Horizons Exchange Traded Products"). The Horizons Exchange Traded
Products are not guaranteed, their values change frequently and
past performance may not be repeated. The prospectus contains
important detailed information about the Horizons Exchange Traded
Products. Please read the relevant prospectus before
investing.
SOURCE Horizons ETFs Management (Canada) Inc.