Horizons ETFs: Opening Doors In Canada’s ETF Industry

Steve Hawkins
President & CEO
Horizons ETFs

Horizons ETFs is the fourth-largest ETF issuer in Canada by assets under management with more than $10 billion in AUM. Among its other credentials, Horizons ETFs brought the world’s first marijuana ETF to market in 2017. Since 2015, President and CEO Steve Hawkins has helmed Horizons ETFs’ ship, launching a number of first-of-their-kind ETFs and gen­erating waves of innovation in his wake that have helped Horizons ETFs more than double its AUM since Hawkins took over leadership of the company.

ETF.com recently spoke with Steve Hawkins to learn about how this Canadian ETF company is building a global brand.

Would you tell our readers about Horizons ETFs?
Horizons ETFs is the fourth-largest ETF firm in Canada. We were the third ETF provider to market with ETFs in Canada. Our first ETF listed in 2007, and today we have 87 ETFs listed on stock exchanges in Canada. We cur­rently have approximately $11 billion in AUM across all our various mandates, including some ETFs we manage for external parties.

Give us a description of your product lineup.
We have three very distinct lineups of ETFs.

We are the only provider of leveraged and inverse leveraged ETFs in Canada—our BetaPro suite. Our BetaPro ETFs offer a com­plement of underlying exposures: oil, natural gas, gold, the S&P 500, etc., but for Cana­dian investors.

Secondly, we have the largest family of actively managed ETFs [by number of ETFs] in Canada. These ETFs are actively managed in the truest sense, in that they use professional portfolio managers seek­ing to generate better risk-adjusted returns than index strategies in the asset classes in which they invest.

Our third lineup includes our bench­mark and thematic ETFs. These are index-tracking strategies that follow well-known indices, such as the S&P/TSX 60, or offer index exposure to thematic asset classes such as marijuana equities or robotics. Our first marijuana ETF, HMMJ, is probably the most widely known of these ETFs. Our lineup of cannabis ETFs has continued to expand—and now includes one dedicated to U.S.-focused cannabis company exposure.

Ultimately, we pride ourselves on prod­uct innovation—like our sister company in the U.S., Global X. One of our strengths com­pared to our competitors in the Canadian market is that we are exclusively focused on ETFs. The majority of Canadian ETF provid­ers started out as mutual fund companies and still have the lion’s share of their AUM in mutual funds. Unlike some other compa­nies, we didn’t start out as a mutual fund provider that turned to launching ETFs to ensure we’re not left out in the cold. We’ve been committed to ETFs as an innovative investment vehicle since we launched our first ETF in 2007.

Would you talk a little bit about your cannabis ETF?
Canada has really become the world leader for cannabis. And we’re very proud to have launched the world’s first cannabis sector ETF. We’ve really become a benchmark for this new and maturing industry, which is going to be an important part of the global marketplace on a going-forward basis.

We now have a cannabis company, Can­opy Growth, in the TSX 60 Index—the major big board index in Canada. That is a critical milestone for the sector. Canada’s leading role in the cannabis industry and Horizons ETFs’ part in empowering global investors to access this market has been a great claim to fame for us.

It’s been, I think, an eye-opener for the ETF industry around the world with the suc­cess that we saw in this product. MJ [the ETFMG Alternative Harvest ETF] was able to follow suit [in the U.S.] nine months later, and they’ve been able to surpass us for now—but with a market that’s 10 times larger than ours.

We built the structure and laid the groundwork for cannabis investing. We’ve initiated a huge push to educate investors on the cannabis space. And we’re very proud of what we’ve done there.

So this isn’t really a marijuana story, it’s really a growth story?
Correct. We strongly believe the long-term prospects for cannabis investing is that it could outperform any traditional benchmark that’s out there in this marketplace.

This is such a quickly maturing indus­try with so many positive growth pros­pects. Today there’s a global push for cannabis legalization, from both a medi­cal and recreational perspective. Canada launched the world’s first ETF, and here we are again, breaking ground: the sec­ond country in the world, and the first G10 country, to legalize marijuana on a federal level. That leading charge laid the ground­work for Canadian companies to capture a distinct advantage over the rest of the cannabis world—for now.

Let’s go back to your suite of products. You began Canada’s active ETF landscape?
We created the first family of actively man­aged ETFs in Canada, and we have the largest group of actively managed ETFs in Canada.

We brought active ETFs to the Cana­dian market over 10 years ago now. Over that time, we worked hard to educate investors on the benefits of actively man­aged ETFs. The first six or seven years were like pushing a large rock up a very steep hill. It’s really only in the past three to four years where we’ve seen those barriers really break down—where investors begin to look beyond traditional physical bench­marking exposure. Currently, the Canadian regulatory environment is more open to actively managed ETFs, when compared to the U.S., making actively managed ETFs a more viable strategy here. All of our active ETFs are targeted at strategies that aligned with the inefficient asset classes that pas­sive investing has traditionally had diffi­culty navigating.

You’ve recently been named the new chair of the Canadian ETF Association: CETFA. What’s on the horizon for ETFs in Canada?
It’s a privilege to take on the position and an honour to be able to advocate and build Canada’s ETF industry. ETFs are certainly having their time in the spotlight in Can­ Can­ada right now. Just last year they outsold mutual funds for the first time in a decade. However, there’s still an education deficit. Many investors—and even some advisors—are just not aware that ETFs are generally the more liquid, more efficient and a lower-cost investment vehicle compared to their mutual fund ancestor. There’s more work to do, but the pendulum is swinging in the right direction.

On the horizon, I see more growth in the Canadian ETF industry. ETFs have become the vehicle of choice for gaining access to novel and emerging asset classes and sectors, and that’s what tends to get people excited about investing. With more and more financial institutions angling to launch their own ETFs, it’s hard to imagine a future for our industry that isn’t filled with choice for investors and healthy competi­tion for providers.