Horizons ETFs Launches Actively Managed Senior Loan ETF
New ETF seeks to offer investors a non-investment grade, high income, low duration strategy
TORONTO, Oct. 14, 2014 /CNW/ - Horizons ETFs Management (Canada) Inc. ("Horizons ETFs") and its affiliate, AlphaPro Management Inc., are pleased to announce the launch of the Horizons Active Floating Rate Senior Loan ETF ("HSL"), a U.S. senior secured floating rate loan ETF alternative to high yield bonds, which will offer some protection from potential rising interest rates.
Class E units and Advisor Class units of HSL will begin trading tomorrow on the Toronto Stock Exchange ("TSX") under the ticker symbols below.
| Name of ETF |
TSX Ticker Symbol |
|
| Class E Units |
Advisor Class Units |
|
| Horizons Active Floating Rate Senior Loan ETF |
HSL |
HSL.A |
HSL seeks to provide unitholders with a high level of current income by investing primarily in a diversified portfolio of U.S. senior secured floating rate loans, which are generally rated below investment grade (loans rated at or below BB+ by Standard & Poor's, or a similar rating by a designated rating organization) and debt securities, with capital appreciation as a secondary objective. HSL will, to the best of its ability, seek to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times.
"In today's low interest rate environment, income investors should be aware of how potential interest rate increases could impact the value of their bond portfolios," said Howard Atkinson, President of Horizons ETFs. "Since senior loan prices are generally not impacted as negatively by rising interest rates as traditional bonds, HSL can be considered a diversification tool for fixed income investors that may help offset some of their interest rate risk."
Often referred to as bank loans or leveraged loans, secured senior loans are debt instruments where the non-investment grade issuer offers to pay a floating rate of interest, usually the 3-month LIBOR plus an attractive interest rate spread. Unlike a traditional non-investment grade / high yield bond, the price of a senior loan is not directly tied to rising interest rates since its floating coupon rate is generally reset every 90 days. A senior loan is also secured against assets of the issuer and generally ranks at the highest levels of the firm's capital structure, meaning, in the case of a company default, senior loan holders have a first priority to be repaid ahead of other firm debt, and preferred share and common stock holders.
"The U.S. senior loan market is much larger than the Canadian corporate bond market, which means there is a sufficiently large universe of investments available to HSL," said Mr. Atkinson.
"It can be a compelling alternative to holding high yield bonds, particularly for investors who are interested in generating an attractive monthly income that will generally rise or fall with short-term interest rates."
Sub-advised by AlphaFixe Capital Inc. ("AlphaFixe"), a Quebec-based investment management firm focused on fixed income investing, HSL will be actively managed by Sébastien Rhéaume and Diane Favreau with their team, who, collectively, have over 50 years of experience investing in senior loans.
"The team at AlphaFixe has one of the longest histories of managing U.S. senior loans in Canada," said Mr. Atkinson. "We believe that the active management expertise AlphaFixe brings to the table will provide us with significant advantages for HSL's investing, versus other senior loan index strategies, since HSL can screen for the highest quality and most liquid issuers available."
"We're excited to be working in partnership with an innovator like Horizons ETFs, which is always bringing new opportunities for ETFs to the Canadian market," said Bruno Di Battista, Senior Vice President of AlphaFixe. "Previously, senior loans were typically looked at as an institutional investment only, but HSL changes that and gives Canadian investors of all levels access to this actively managed income alternative strategy."
HSL also offers a number of structural advantages compared to other senior loan products, such as its flexible asset allocation policy, which allows the ETF to hold cash, high yield bonds, and even investment grade bonds, that can all provide additional liquidity during adverse credit markets. HSL will endeavour to be substantially invested in, or exposed to, senior loans throughout all market conditions.
HSL has closed the offering of its initial Class E and Advisor Class units and will begin trading on the TSX when the market opens tomorrow morning.
About AlphaFixe Capital Inc. (www.alphafixe.com)
Founded in 2008, AlphaFixe Capital is a leading investment manager specialized in fixed income and specifically, senior loans. Its seven-person portfolio management team has over 144 years of fixed income management experience and currently has assets under management of $2.8 billion, as at September 30, 2014, serving primarily institutional clients. It is 100% employee owned with a true entrepreneurial approach towards investing, which includes a flexible approach and capital preservation focus.
About Horizons ETFs Management (Canada) Inc. (www.HorizonsETFs.com)
Horizons ETFs Management (Canada) Inc. and its affiliate AlphaPro Management Inc. are innovative financial services companies offering the Horizons ETFs family of exchange-traded funds. The Horizons ETFs family includes a broadly diversified range of investment tools with solutions for investors of all experience levels to meet their investment objectives in a variety of market conditions. Horizons ETFs has more than $4.5 billion of assets under management and with 72 ETFs listed on the Toronto Stock Exchange (as at September 30, 2014), the Horizons ETFs family makes up one of the largest families of ETFs in Canada. Horizons ETFs Management (Canada) Inc. and AlphaPro Management Inc. are members of the Mirae Asset Financial Group.
Commissions, trailing commissions, management fees and expenses all may be associated with an investment in exchange traded products managed by AlphaPro Management Inc. and 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. HSL invests primarily in senior secured loans, which typically have settlement periods that are longer than for other types of debt securities. HSL is not a substitute for holding cash or money market securities. Please read the relevant prospectus before investing.
Certain statements contained in this news release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to a future outlook and anticipated distributions, events or results and may include statements regarding future financial performance. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "anticipate", "believe", "intend" or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Horizons ETFs undertakes no obligation to update publicly or otherwise revise any forward-looking statement whether as a result of new information, future events or other such factors which affect this information, except as required by law.
SOURCE: Horizons ETFs Management (Canada) Inc.
Howard Atkinson, President, Horizons ETFs Management (Canada) Inc., (416) 777-5167, [email protected]
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