Horizons ETFs Management (Canada) plans to eliminate all advisor-class units of its Canadian-listed exchange traded funds.
As of January 31, 2017, investment professionals will no longer be able to purchase advisor-class units from Horizons ETFs. This class of ETF unit is expected to be fully eliminated by the end of April, 2017.
Advisor-class units are currently only available on certain actively managed ETFs offered by Horizons ETFs and are denoted by “.A”, or “.V” for applicable U.S.-dollar-denominated ETFs, after their ticker symbols. Currently, advisor-class units make up less than 1% of Horizons ETFs assets under management.
“We launched advisor-class units in Canada within our suite of actively managed ETFs as a bridge to allow commission-based investment professionals to embrace ETFs and transition away from mutual funds with service fees,” said Steven J. Hawkins, president and co-CEO Horizons ETFs. “Increasingly, we’ve found commission-based investment advisors who have become ETF investors have tended to transition to fee-based accounts as well, and we expect this will be a long-term trend in the Canadian investment industry. We think there will be less need in the future for investment funds, particularly ETFs, to offer embedded compensation to investment professionals.”
Advisor-class units offered by Horizons ETFs pay a quarterly trailer fee of 0.75% (75 basis points) on equity focused ETF mandates and 0.50% (50 basis points) on fixed-income-focused ETF mandates. This service fee is a form of embedded compensation that is reflected in a higher management expense ratio for the advisor-class units of these ETFs.
On or about April 28, 2017, Horizons ETFs plans to reduce the annual management fee on the advisor-class units by an amount equal to the applicable service fee payable by the manager in respect of that class of units. Then, either concurrently or as soon as possible, it will convert all advisor-class units into common class units of the same ETFs.