ActiveETFs | InFocus

Date Launched: 19 Nov, 2009

Links: Website, Factsheet, Prospectus

Investment Strategy:

HAC is an actively-managed ETF that has a unique seasonal rotation investment strategy, developed by Don Vialoux and Brooke Thackray. It invests across equities, fixed income, commodities and currencies to achieve long-term capital appreciation. HAC’s investment methodology is dictated by a seasonal investment timeline which identifies industries, sectors and stock market segments that have done well historically in different months of the year. The fund then invests in those markets and sectors that have traditionally outperformed during that time of the year and moves into money market securities during seasonably unfavourable times. HAC utilizes ETFs and futures to build exposures. However, the investment managers – JovInvestment Management Inc. – does utilize fundamental and technical analysis to support the seasonal investment strategy. The fund does not have a stated benchmark.

Portfolio Managers:

Investment decisions for HAC are made by JovInvestment Management Inc., which is a Toronto based asset manager having approximately $3.7 billion under management. The investment decisions for HAC are made by the following:

Don Vialoux – Don Vialoux has over 40 years of investment experience, is a Director at the Canadian Society of Technical Analysts has written a thesis on “Seasonality in Canadian Equity Prices” while achieving the Chartered Market Technician designation.

Brooke Thackray – Brooke Thackray has nearly 14 years of investment related experience, most recently as President of MountAlpha Media, where he has written and published several books.

The Numbers:

Expense Ratio – 0.75% (Management Fee) + Performance Fee. The performance fee is 20% of the amount by which the performance exceeds the high water mark.

Market Cap – $10.30 million

Average Volume – 7,715 shares

What’s special about it?

1. HAC is allowed to take on short exposure to markets and sectors and even leveraged short exposure through the ETFs it invests in. Since Horizons BetaPro provides the majority of leveraged and inverse ETFs on the Canadian market, HAC is allowed to invest up to 10% in those BetaPro ETFs. However, the total short exposure cannot exceed 20% of the ETF’s total net assets.

2. Given the investment manager’s reliance on timing the market, whether HAC appeals to you really depends on whether you believe the market can be timed in the first place. The prospectus cites research that supports the view that certain sectors and markets earn higher returns during certain periods of the year.

3. Interestingly, both Horizons AlphaPro and JovInvestment Management are subsidiaries of the same company – Jovian Capital Corp, which is publicly traded company on the TSX. Not surprising then that the management of the fund was kept “in-house”.

Analysis:

Positives –

- The managers at the helm of HAC are known for their seasonal strategies and both bring a lot of technical analysis experience to the management of the fund. There is also research supporting their theory on seasonal investment strategies.

Negatives –

- While the 0.75% management is not unusual for an actively-managed ETF, the hedge-fund style performance fee structure definitely is. Hence, the final amount being paid in fee could be much more than just 0.75%.

- HAC now has a market capitalization of $10.24million but still is not very actively-traded with traded volumes average only several thousand shares per day. The resulting bid-ask spread could be quite wide for investors looking to get in and out of HAC.

Performance since inception vs S&P/TSX:

Disclosure: No positions in above-mentioned names.

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