Horizons alters ETF name, fee structure

Horizons ETFs and affiliate AlphaPro Management say the name and fee structure of the Horizons Active Advantage Yield ETF is being changed, effective September 6, 2013.

It will then be called the Horizons Active Yield Matched Duration ETF to emphasize the fund’s risk-mitigation strategy, which aims to limit the negative impact that future interest rate increases could have on performance.

For example, the fund’s continuing manager, Fiera Capital, says an interest rate increase of 1% can generally be expected to cause a 1% decline in the value of a fixed-income security for every year of its duration. But by matching duration with yield, the fund strategy aims to mitigate that negative effect.

Horizons says Fiera selects fixed-income securities based on economic, interest rate and credit rating analysis.

“Being a bond investor…has rarely been riskier,” says Howard Atkinson, president of Horizons ETFs. “[Due to] low interest rates, investors are forced to stretch for yield, which could heighten portfolio risk if rates suddenly rise. They did in June, causing losses in most Canadian fixed income ETFs.”

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In addition to the name change, the fund’s fee structure will be altered; on and after September 1, 2013, the ETF will pay revised management fees, which will be calculated and accrued daily, and payable monthly in arrears. The fees will be equal to 0.45% of the net asset value of the Class E units of the ETF, or 0.95% of the net asset value of the Advisor Class units of the ETF (plus applicable sales taxes).

Horizons says the aggregate management fees the manager receives won’t change as a result. Additionally, the manager was entitled to receive a performance fee up until March 31, 2013, but that fee has been removed.

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