Horizons ETFs closes two volatility-focused exchange-traded funds

By The IJ Staff | April 11 2018 01:30PM

Horizons ETFs Management (Canada) Inc. announced April 10 that it will be terminating the BetaPro S&P 500 VIX Short-Term Futures 2X Daily Bull ETF (HVU) and the BetaPro S&P 500 VIX Short-Term FuturesDaily Inverse ETF (HVI) effective June 11, 2018.

Effective immediately, no further direct subscriptions for units of the ETFs will be accepted and June 5 is expected to be the last date on which a redemption request may be placed with Horizons ETFs. The ETFs are expected to be de-listed from the TSX at on or about June 6 with all units still held by investors being subject to a mandatory redemption as of the termination date.

Irrational and erratic pricing

The company explains that since early February of this year, “the pricing in S&P 500 VIX futures has been very irrational and erratic. This volatility, in the case of HVI and HVU, has, in the Manager's view, significantly changed the risk profile of these two ETFs to be far too high for Canadian investors.”

No longer an acceptable risk/reward trade-off

"After reassessing the performance of HVU and HVI, particularly their respective performance following the first week of February, when volatility futures contracts spiked by more than 100 per cent during one 24-hour trading period, we have come to the conclusion that these ETFs no longer offer an acceptable risk/reward trade-off for investors," said Steve Hawkins, President and Co-CEO of Horizons ETFs. "We are an asset manager that generates revenue from management fees on our products, so our goals are, and have always been, aligned with those of our ETF investors: we want our investors to generate positive returns. Ultimately, we do not want to be offering investment products that have the potential to lose the majority of an investor's capital in such a short period of time."

Any remaining unitholders of the ETF as at the termination date will receive the net proceeds from the liquidation of the assets, less all liabilities and all expenses incurred in connection with the dissolution of the ETF, on a pro-rata basis, says the company.

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