JohnCM
4 years ago
Important Risk Considerations
HMJI is very different from most other exchange-traded funds, and is permitted to use strategies generally
prohibited by conventional mutual funds. While such strategies will only be used in accordance with the
investment objective and strategy of the ETF, during certain market conditions they may accelerate the
risk that an investment in the Units of the ETF decreases in value.
HMJI, before fees and expenses, does not and should not be expected to return the inverse (e.g. -100%)
of the return of its Underlying Index over any period of time other than daily.
The returns of HMJI over periods longer than one day will, under most market conditions, be in the
opposite direction from the performance of its Underlying Index for the same period. However, the
deviation of returns of HMJI from the inverse performance of its Underlying Index can be expected to
become more pronounced as the volatility of HMJI’s Underlying Index, and/or the period of time increases.
Hedging costs charged to an ETF reduce the value of the forward price payable to that ETF. Due to the high
cost of borrowing the securities of marijuana companies, the hedging costs charged to HMJI and indirectly
borne by Unitholders are anticipated to be material.
Although the hedging costs of HMJI are assessed on a monthly basis to reflect the current market
conditions, these hedging costs are expected to materially reduce the daily returns of HMJI to Unitholders
and to materially impair the ability of HMJI to meet its investment objectives. Currently, Horizons ETFs
Management (Canada) Inc. (the “Manager”) anticipates that, in respect of HMJI, based on existing market
conditions, the hedging costs charged to HMJI and indirectly borne by Unitholders will be between 10.00% and 45.00% per annum of the aggregate notional exposure of HMJI’s Forward Documents.
The hedging costs may increase beyond this range.
Although the Manager does not, as of the date of its most recent prospectus, anticipate suspending
subscriptions for new Units, it is possible that due to a Counterparty’s difficulties and costs associated with
shorting the securities of constituent issuers, including the potential inability of a Counterparty to borrow
securities of constituent issuers in order to “short” such issuers, HMJI will be subject to the risk that one or
more Counterparties could refuse to increase the ETF’s existing notional exposure under the current Forward
Documents.
If the ETF cannot increase its notional exposure under the Forward Documents, the Manager will accordingly suspend new subscriptions for Units of HMJI until such time as the Manager can
increase the notional exposure under the Forward Documents. During a period of suspended subscriptions,
investors should note that Units of HMJI are expected to trade at a premium or substantial premium to NAV.
In such cases, investors are strongly discouraged from purchasing Units of HMJI on a stock exchange. Any
suspension of subscriptions will be announced by press release and on the Manager’s website.
The suspension of subscriptions, if any, will not affect the ability of existing Unitholders to sell their Units in the secondary market at a price reflective of the NAV per Unit. See “Significant Hedging Cost Risk and Risk of Suspended Subscriptions (HMJI)” in the prospectus.
Investors should read the prospectus to understand the risks, and monitor their investments in the ETF at least daily.
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nowwhat2
5 years ago
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