Horizons ETFs Management (Canada) Inc. is launching two new sets of exchange-traded funds that will allow investors to bet either for or against two of the country’s biggest sectors: real estate and banking.
The “double up, double down” ETFs are targeted to short-term investors looking to actively trade real estate investment trust (REIT) ETFs, as well as Canada’s big banks, said Steve Hawkins, president and chief executive officer of Horizons ETFs.
“The real estate market and the Canadian banks are two of the hottest sectors out there,” in Canada today, Mr. Hawkins said. “It has given investors the opportunity to want to invest more into these spaces [and] has also created the need or the necessity for some investors to potentially want to short these sectors.”
On Thursday, Horizons ETFs will start offering investors the BetaPro Equal Weight Canadian REIT 2x Daily Bull ETF (HREU) and the BetaPro Equal Weight Canadian REIT -2x Daily Bear ETF (HRED). The strategies correspond to the Solactive Equal Weight Canada REIT Index.
On Sept. 9, the company is expected to launch the BetaPro Equal Weight Canadian Bank 2x Daily Bull ETF (HBKU) and the BetaPro Equal Weight Canadian Bank -2x Daily Bear ETF (HBKD). These strategies are based on the Solactive Equal Weight Canada Banks Index.
All four ETFs will trade on the Toronto Stock Exchange and have a management expense ratio of 1.15 per cent.
The ETFs join the company’s growing BetaPro family of funds that provide leveraged and inversed leveraged ETFs across different sectors such as gold, silver and energy, as well as indexes such as the S&P/TSX 60 and the S&P 500. Horizons ETFs already has a financial product in this fund series, but Mr. Hawkins said it includes exposure to insurance companies and is market-weighted.
With the new BetaPro real estate ETFs, Mr. Hawkins said the strategy isn’t a play on a particular part of the sectors, such as office or residential, but instead provides “well-rounded” exposure given the broader diversification of most of Canada’s larger REITs.
Canada’s roaring housing market has triggered a long-running debate about whether the market is in a bubble, but investors have few options to bet against it. The new Horizons ETFs aren’t directly tied to residential real estate, but several of Canada’s REITs own apartment properties, and all of Canada’s big banks have extensive mortgage portfolios.
Leveraged ETFs aren’t for everybody. The leveraged structure magnifies gains and losses, and since they don’t fully track their underlying indexes beyond one day, they’re not seen as suitable for long-term-oriented investors.
He said the BetaPro ETFs are geared to investors “who want to take really convicted, short-term trades in spaces like banks and real estate … based on their present opinion, which could be positive or negative.”
Mr. Hawkins said the leveraged and inverse leveraged ETFs have higher fees than many traditional ETFs but argues they enable investors to take a long or short view without taking on high costs of using margin, borrowing or shorting directly.
“When you short an individual security, you have unlimited liability, unlimited risk, at that point in time,” he said. “When you buy our inverse leveraged ETFs, specifically, your potential loss is limited to only what you’ve invested. And we haven’t really seen that in the leveraged equity space.”
Horizons ETFs is also “actively looking” at providing more leveraged and inverse leveraged ETFs for the cryptocurrency space.
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