Horizons ETFs Canada has lowered the total cost of ownership of the Horizons Nasdaq 100 Index ETF (HXQ CN) by switching the fund’s replication method.
The fund is now the cheapest ETF in Canada to provide exposure to the Nasdaq 100 Index.
The ETF is linked to the Nasdaq 100 Index, the pre-eminent large-cap growth index, which consists of 100 of the largest US and international non-financial companies listed on Nasdaq Exchange.
Previously, the fund tracked the Nasdaq 100 using synthetic, or swap-based, replication. It charged a management fee of 0.25% and a swap fee of 0.375%.
During December 2019, Horizons completed a corporate fund restructuring of 15 Total Return Index (TRI) ETFs, including the Horizons Nasdaq 100 Index ETF, allowing the funds to switch from synthetic to direct physical replication.
According to Horizons, the new corporate structure maintains key benefits of the TRI ETFs such as minimal tracking error and tax-efficiency for taxable accounts.
Under the new approach of direct physical replication, the management fee of 0.25% remains unchanged, but the swap fee has been eliminated.
With the fund housing C$210 million in assets under management, the switch to direct physical replication benefits current investors with annual cost savings of approximately C$787,500.
The ETF’s management expense ratio (MER), which covers all fund operating expenses, is now quoted as 0.28%, the lowest amongst all Nasdaq 100 ETFs in Canada.
BMO and iShares also offer Nasdaq 100 ETFs in the country – these funds come with MERs ranging from 0.35% to 0.39%.
Steve Hawkins, President and CEO of Horizons ETFs, commented, “One of the goals with all of our TRI ETFs is to provide the most efficient exposure to prominent index benchmark strategies for taxable Canadian investors from both a cost and tax perspective. Our new corporate class structure allows us to bring HXQ’s total cost of ownership down to a level that we believe achieves this goal.
“The new corporate class structure permits our ETFs within the structure, including HXQ, to improve operational efficiency and substantially reduce the likelihood of distributions. Not only is HXQ expected to be the lowest-cost NASDAQ 100 ETF in Canada, it will also be, in our view, the most efficient option for taxable investors.”