TORONTO, April 22, 2020 /CNW/ - Horizons ETFs
Management (Canada) Inc. (the
"Manager") continues to assess the impact of the volatility
in the underlying futures contracts on the ability of the BetaPro
Crude Oil 2x Daily Bull ETF ("HOU") and BetaPro Crude Oil
-2x Daily Bear ETF ("HOD", and together with HOU, the
"ETFs") to track the Solactive Light Sweet Crude Oil Front
Month MD Rolling Futures Index ER (the "Underlying Index"),
and provides investors with the following update regarding the
ETFs.
HOU and HOD – Stated Investment Objectives
HOU seeks daily investment results that endeavour to correspond
to two times (200%) the daily performance of the Underlying Index.
If HOU is successful in meeting its investment objective, its net
asset value should gain approximately twice as much on a given day,
on a percentage basis, as any increase in its Underlying Index
(when the Underlying Index rises on that day). Conversely, HOU's
net asset value should lose approximately twice as much on a given
day, on a percentage basis, as any decrease in its Underlying Index
(when the Underlying Index declines on that day).
HOD seeks daily investment results that endeavour to correspond
to two times (200%) the inverse (opposite) of the daily performance
of the Underlying Index. If HOD is successful in meeting its
investment objective, its net asset value should gain approximately
twice as much on a given day, on a percentage basis, as any
decrease in its Underlying Index (when the Underlying Index
declines on that day). Conversely, HOD's net asset value should
lose approximately twice as much on a given day, on a percentage
basis, as any increase in its Underlying Index (when its Underlying
Index rises on that day).
Based on the stated investment objectives, if the price of the
underlying futures contract moves up by 50% or more in one trading
day, the shares of HOD, which provide double inverse exposure to
the price performance of those futures contract, would be expected
to have a resulting net asset value of zero. Conversely, if the
underlying futures contract moved down by 50% or more over a
trading day, the shares of HOU, which provide double exposure to
the price performance of those futures contract, would be expected
to have a resulting net asset value of zero.
For example, the June futures contract settled yesterday at
2:30 p.m. (EST), the time each
business day at which the exposure of each of the ETFs is
rebalanced, at a price of $11.57. If,
today, the June futures contract price was to rise by more
than 50% (or $5.79) to $17.36 or higher for its 2:30 p.m. (EST) settlement, the shares of HOD
would be expected to have a resulting net asset value of
$0.00. Conversely, if today, the
June futures contract price was to fall by more than 50% (or
$5.79) to $5.78 or less for the 2:30
p.m. (EST) settlement, shares of HOU would be expected
to have a resulting net asset value of $0.00. Based on these examples, if the net
asset value of either HOU or HOD is determined to have a net asset
value equal to or less than $0.00 as
at 2:30 p.m. (EST) today, (being the
time each business day at which the exposure of each ETF is
rebalanced), then the net asset value of that ETF after that time
will also be $0.00. Accordingly, in
such an event, any investors, that held shares of such ETF or were
to buy shares of such ETF at this time or after, would likely
suffer a complete loss of their investment.
Current Underlying Index
The Underlying Index tracks the performance of a referenced
futures contract for a subsequent delivery month, and rolls its
exposure as described in the prospectus of the ETFs. The full index
methodology is available at www.Solactive.com. HOU and HOD's
Underlying Index will use, in its closing calculation on any
Trading Day, the settlement price of the referenced futures
contract for a subsequent delivery month. The referenced futures
contract trades on the Chicago Mercantile Exchange and the daily
settlement price is determined at 2:30 p.m.
(EST) on a normal business day. The settlement price is
typically not publicly available until at least 15 minutes after
the settlement price is determined. The performance of the
Underlying Index will be based on a rolling position of the
referenced futures contract for a subsequent delivery month.
Continued Suspended Subscriptions (commenced April 21, 2020)
On April 21, 2020, the Manager
announced it will not be accepting new subscriptions for shares of
HOU or HOD until further notice. Accordingly, the Manager
anticipates that purchases of new shares of the ETFs at the
available offer prices on the secondary market are not expected to
be reflective of the underlying net asset values per share. It is
imperative to note that shares of the ETFs could be expected to
trade at a substantial premium to their net asset value while
subscriptions of shares are suspended.
Redemptions will continue to be accepted in the normal course.
The Manager anticipates that the secondary market will continue to
provide holders of shares with an efficient forum to sell shares at
a price reflective of at least the applicable intra-day net asset
value per share.
Additional Changes Affecting the ETFs
Notwithstanding the stated investment objectives of HOU and HOD
above, due to the volatility in the crude oil markets, negotiations
with the ETF's counterparties, and the resulting changes to the
ETF's operations, the Manager no longer expects HOU or HOD to meet
their stated investment objectives after 2:30 p.m. (EST) today.
Temporary Reduction of Leverage (effective 2:30 p.m. (EST) on April
22, 2020)
Effective at 2:30 p.m. (EST)
today, it is anticipated by the Manager that the daily performance
of HOU will endeavour to correspond to one-times, instead of
two-times, the daily performance of its underlying exposure based
on an amended rolling methodology described below.
Effective at 2:30 p.m. (EST)
today, it is anticipated by the Manager that the daily performance
of HOD will endeavour to correspond to one-times, instead of
two-times, the inverse (opposite) daily performance of its
underlying exposure based on an amended rolling methodology
described below.
Amended Rolling Methodologies (effective 2:30p.m. (EST) on April 22, 2020)
Based on the current rolling methodology employed by the
Underlying Index, the ETFs track the June primary futures contract
and are not scheduled to commence rolling to the July secondary
futures contract until May 6, 2020.
Notwithstanding the foregoing, effective at 2:30pm (EST) today, 100% of the underlying
exposure of the ETFs will roll to the July secondary futures
contract. Subsequently, and until further notice, it is anticipated
that the monthly roll dates for HOU and HOD for 100% of the primary
futures contract will roll to the secondary futures contract on the
10th trading day of the primary futures contract. The
Manager will confirm the future anticipated roll dates and
applicable futures contracts in due course.
An investment in shares of the ETFs involves certain risks,
including as a result of the foregoing changes. Investing in
shares of the ETFs can be speculative, can involve a high degree of
risk and may only be suitable for persons who are able to assume
the risk of losing their entire investment. Potential
investors in these ETFs are reminded to read the prospectus, as
amended from time to time, and all available public information
provided by the Manager before investing. Investors should continue
to monitor their investment daily and note that the ETFs are no
longer expected to achieve their stated investment objective for
the reason set forth above.
The Manager will advise as soon as there are any further
developments with respect to the ETFs.
SOURCE Horizons ETFs Management (Canada) Inc.
