Horizons ETFs launches Active S&P/TSX 60 Covered Call ETF
Horizons Exchange Traded Funds and its affiliate AlphaPro Management have launched the Horizons Active S&P/TSX 60 Index Covered Call ETF, which uses a covered call strategy to generate additional income from the option eligible stocks comprising the S&P/TSX 60 Index.
The ETF will be traded on the Toronto Stock Exchange under the symbol HAX.
The investment objective of HAX is to provide Unitholders with: (a) exposure to the performance, to the extent possible, of the S&P/TSX 60 Index, together with the impact of a covered call strategy, before fees and expenses; and (b) monthly distributions of dividend and call option income.
HAX will hold all 60 of the constituent stocks in the S&P/TSX 60 Index in proportion to their respective weights in the index. The ETF will write covered call options on the option eligible securities in the portfolio to generate a tax-efficient, monthly distribution. The level of covered call option writing may vary based on market volatility and other factors.
"This is the first covered call ETF in Canada that will proportion its holdings to that of S&P/TSX 60 Index, which is, in our view, the most important Canadian stock benchmark," says Howard Atkinson, chief executive of Horizons Exchange Traded Funds. "Covered call strategies have historically been shown to enhance the income earned from stocks while reducing volatility."
Horizons Investment Management Inc (HIMI), an affiliate of AlphaPro, is the investment manager to the ETF. The HIMI investment team, including Eden Rahim, vice-president and options strategist, provides the portfolio management services to the ETF. HAX will be the eighth equity-focused covered call ETF that Horizons ETFs has launched which uses Rahim's dynamic covered call writing strategy.
"Eden and the team oversee more than USD500m in assets on behalf of Horizons ETFs," says Atkinson. "They have done a terrific job of raising awareness to covered call products in Canada and the benefits they can potentially offer investors including generating income and mitigating portfolio risk."
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