Horizons ETFs and its affiliate AlphaPro Management have launched an exchange traded fund (ETF) focused on Canadian municipal bonds. The ETF is the first of its kind in the country.
Units of the actively-managed ETF began trading on the Toronto Stock Exchange on August 13. The fund is denominated in Canadian dollars and will trade under the ticker symbols “HMP” (for Class E units) and “HMP.A” (for Advisor Class units); the management fee for the former is 0.35%, while it is 0.85% for Advisor class, which includes a service fee of 0.50%.
In a press release announcing the new product, Horizons notes that the size of the Canadian municipal bond market is about $40 billion, with Quebec municipalities making up nearly half of the issues.The company points out that municipal bonds that have not been rated by a third-party credit rating agency account for approximately $16 billion or 40% of the market; Horizons has therefore retained Fiera Capital to conduct independent credit analysis for the ETF in order to find the most attractive opportunities among non-rated issues.
“Municipal bonds offer investors an attractive risk-return profile because they have a low risk of default but are higher yielding than other types of Canadian government and provincial bonds,” says Horizons ETFs president Howard Atkinson. “Historically, retail investors could only get targeted exposure to municipal bonds by buying the individual issues. HMP is the first ETF in Canada that provides investors with direct access to a diversified Canadian municipal bond portfolio.”