Horizons ETFs Management (Canada) has rolled out its Cdn Select Universe Bond ETF (HBB), designed to deliver investors low-cost and tax-efficient exposure to the Canadian investment grade bond universe.
HBB, which will aim to replicate the performance of the Solactive Canadian Select Universe Bond Index, will also be the first fixed income ETF in Canada to use the modern total return swap (TRS) structure.
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The company said this total return structure can slash the risk of tracking error for ETFs that arises when seeking to replicate their referenced indices while also providing tax efficiency for unit holders.
Commenting on the launch, Horizons ETFs president Howard Atkinson said, "The Canadian index ETF market may be viewed as saturated, but that doesn’t mean there isn’t room for further product innovation."
"HBB is an example of how indexing in the fixed income space can be made better by both improving the underlying index and utilizing a TRS structure to reduce the potential for tracking error and improve tax efficiency."
"We think they have done a great job in building a fixed income index that offers all the performance characteristics of the broad Canadian bond universe, but uses a more focused methodology that allows for easier and cost-efficient replication," Atkinson added.
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By GlobalDataHBB will track a total return version of the Index, which means that the net-asset-value of the ETF will instantly reflect the value of any distributions made by the underlying securities of the Index.
