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Email this2:53 pm
September 5, 2023
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TINAisOver said
I can see , Canuckles, what you aim to achieve. I may have a solution for you. I don't know what your time horizon is, but you mention "temporary". Instead of HSAV. Use one or a handful of the regular HISA ETFs. Buy them on ex-div. day and sell the day before the next ex-div. day and repeat the process. This will give you the longest strech of gain.
So the high interest Money Market funds are not as liquid as I thought they would be. Sounds like the ideal time to buy is ex dividend, and the ideal time to sell is pre dividend. If I want to park registered funds (i.e. no immediate tax implications) somewhere and a good opportunity to invest comes up I dont really want the beginning, middle or end of the month to be a significant consideration. Any recommendations for ETFs where I can move money in and out and still earn a reasonable interest? Or is that asking for a free lunch and cake too?
3:12 pm
April 27, 2017
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althisa said
So the high interest Money Market funds are not as liquid as I thought they would be. Sounds like the ideal time to buy is ex dividend, and the ideal time to sell is pre dividend. If I want to park registered funds (i.e. no immediate tax implications) somewhere and a good opportunity to invest comes up I dont really want the beginning, middle or end of the month to be a significant consideration. Any recommendations for ETFs where I can move money in and out and still earn a reasonable interest? Or is that asking for a free lunch and cake too?
1. Money market funds and HISA funds are not the same.
2. HISA ETFs are liquid and will be liquid unless something unique is going on.
3. The funds are not registered. The type of account might be.
4. Why is the ideal time to buy ex dividend? You completely lost me there.
5:35 pm
September 5, 2023
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mordko said
1. Money market funds and HISA funds are not the same.
2. HISA ETFs are liquid and will be liquid unless something unique is going on.
3. The funds are not registered. The type of account might be.
4. Why is the ideal time to buy ex dividend? You completely lost me there.
Right, I meant HISA ETFs
I am following logic of the process described by @TINAisOver:
"Buy them on ex-div. day and sell the day before the next ex-div. day and repeat the process."
6:05 pm
April 27, 2017
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althisa said
Right, I meant HISA ETFs
I am following logic of the process described by @TINAisOver:
"Buy them on ex-div. day and sell the day before the next ex-div. day and repeat the process."
He is talking about minimizing interest and maximizing capital gains. That applies to non-registered accounts. You are talking about a non-tsxable account so irrelevant. Even in taxable accounts this type of masochism would be waste of time and effort for most people.
Back to your question… You can move money in and out any HISA ETF. There is a cost to doing that though, including spread and fees that your brokerage may charge.
Honestly, you may want to stick with standard HISAs.
7:55 pm
April 6, 2013
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NorthernRaven said
I'm not sure how the bank interest paid to Horizon is treated for tax purposes, there must be some way it isn't taxable while undistributed, or some such notion, and maybe there's something about the accumulated time/size that would cause that to spill out of its bounds at the size HSAV grew too? Perhaps the banks aren't technically paying interest, but some sort of "swap" of that amount, like Horizon's synthetic index ETFS (HXT, etc)?
…
HSAV and some other Horizon ETF's are different classes of shares of a mutual fund corporation named Horizons ETF Corporation.
The banks are paying interest on the deposits for the HSAV class shares to Horizons ETF Corporation. On the corporate tax return for Horizons ETF Corporation, that interest is shielded from taxation using the deductions for the HSAV's 0.18% MER and some of the deductions for the MER of the other funds in the same mutual fund corporation.
If there's $2 billion of HSAV deposits earning 5%, then there will be $100 million of interest received from the banks. Deduction of HSAV's own 0.18% MER will shield $3.6 million of the interest.
The remaining $96.4 million of interest can be shielded from taxation with the deduction for, as an example, the 0.10% MER for $96.4 billion of the holdings of HXS, the Horizons S&P 500 Index ETF.
8:20 pm
August 4, 2010
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Ah, thanks, that was the magic fiddle I couldn't remember - they've only got so much in MER expenses to write off. And that's why they could say in advance that the fund might close as it went north of $1.5 billion, they'd have a rough idea of when the MER writeoff amounts would start being insufficient to cover the received interest. So they won't have scope to reopen it until they get a sufficient combination of lower interest rates and significant AUM growth in those funds.
11:01 pm
April 6, 2013
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The Horizons ETF Corporation has other expenses that can also be used, like the swap fee on some of the funds. For example, the Horizons S&P 500 Index ETF (HXS) can have swap expenses up to 0.30% per annum in addition to the fund's 0.10% per annum MER.
Bu, that's essentially it: There's only so much in expenses available in total within the mutual fund corporation. That limits how much HSAV interest can be shielded from taxation and consequently how large HSAV can become before interest earn starts to be taxed.
5:28 am
March 30, 2017
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Norman1 said
The Horizons ETF Corporation has other expenses that can also be used, like the swap fee on some of the funds. For example, the Horizons S&P 500 Index ETF (HXS) can have swap expenses up to 0.30% per annum in addition to the fund's 0.10% per annum MER.Bu, that's essentially it: There's only so much in expenses available in total within the mutual fund corporation. That limits how much HSAV interest can be shielded from taxation and consequently how large HSAV can become before interest earn starts to be taxed.
There is also the limiting factor the agreement with NA and CM how big a program they need. Sourcing their funding at 5%+ is not the cheapest according to the bank's treasurer.
5:47 am
April 27, 2017
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NorthernRaven said
Ah, thanks, that was the magic fiddle I couldn't remember - they've only got so much in MER expenses to write off. And that's why they could say in advance that the fund might close as it went north of $1.5 billion, they'd have a rough idea of when the MER writeoff amounts would start being insufficient to cover the received interest. So they won't have scope to reopen it until they get a sufficient combination of lower interest rates and significant AUM growth in those funds.
Prospectus says that the total asset ceiling is fixed. They won’t “reopen” it until people withdraw enough cash out of this ETF.
9:40 am
August 14, 2023
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Norman1 said
NorthernRaven said
I'm not sure how the bank interest paid to Horizon is treated for tax purposes, there must be some way it isn't taxable while undistributed, or some such notion, and maybe there's something about the accumulated time/size that would cause that to spill out of its bounds at the size HSAV grew too? Perhaps the banks aren't technically paying interest, but some sort of "swap" of that amount, like Horizon's synthetic index ETFS (HXT, etc)?
…HSAV and some other Horizon ETF's are different classes of shares of a mutual fund corporation named Horizons ETF Corporation.
The banks are paying interest on the deposits for the HSAV class shares to Horizons ETF Corporation. On the corporate tax return for Horizons ETF Corporation, that interest is shielded from taxation using the deductions for the HSAV's 0.18% MER and some of the deductions for the MER of the other funds in the same mutual fund corporation.
If there's $2 billion of HSAV deposits earning 5%, then there will be $100 million of interest received from the banks. Deduction of HSAV's own 0.18% MER will shield $3.6 million of the interest.
The remaining $96.4 million of interest can be shielded from taxation with the deduction for, as an example, the 0.10% MER for $96.4 billion of the holdings of HXS, the Horizons S&P 500 Index ETF.
Thanks Norman1 , This explains how the tax implications effect HSAV. I'm now no longer bewildered. Also why we have not seen more of these types of HISA ETFs.
Trader first, Saver second
12:32 pm
August 14, 2023
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althisa said
So the high interest Money Market funds are not as liquid as I thought they would be. Sounds like the ideal time to buy is ex dividend, and the ideal time to sell is pre dividend. If I want to park registered funds (i.e. no immediate tax implications) somewhere and a good opportunity to invest comes up I dont really want the beginning, middle or end of the month to be a significant consideration. Any recommendations for ETFs where I can move money in and out and still earn a reasonable interest? Or is that asking for a free lunch and cake too?
mordko said
1. Money market funds and HISA funds are not the same.
2. HISA ETFs are liquid and will be liquid unless something unique is going on.
3. The funds are not registered. The type of account might be.
4. Why is the ideal time to buy ex dividend? You completely lost me there.
Money Market Fund ETFs (MMF) are not HISA ETFs. However, Before HISA ETFs came along, MMF ETFs have been around awhile, such as CMR. When searching for HISA ETFs in ETF screeners they are listed under the category of MMF's. Moreover, often the financial talking heads will refer to them as MMF's or HISA MMFs on any given Financial TV network. Its's a given or understood in the financial industry that HISA's are not MMFs , but only using MMFs as an umbrella heading as a capture all category. What is similar is their certainty of return therefore they were lumped in and referred to as MMFs in general. I agree, HISA ETF's are not MMFs and should have a classification of their own. This is not unusual either , such as , bonds. Bonds are also used as a catch all Category. The industry commonly will refer to Bills and Notes in general terms as bonds , like belonging to a family of products . But These are all actually Treasuries. Bills, Notes and Bonds actually represent different duration periods. Bonds being the longest treasury duration sub group. All these money products / instruments, such as, GICs, MMF/HISA ETFS, Treasuries (ETFS), Money Market, are classified under the catch all term "fixed income".
Trader first, Saver second
7:44 pm
April 6, 2013
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savemoresaveoften said
There is also the limiting factor the agreement with NA and CM how big a program they need. Sourcing their funding at 5%+ is not the cheapest according to the bank's treasurer.
5% is the going rate for short term funds. Scotia iTRADE is offering Government of Canada treasury bills that mature next week (December 7) yielding 5.02%. Scotia iTRADE is also offering Bank of Nova Scotia ISA, Series F yielding 5%. RBC's prime-linked cashable GIC pays 5.20% on $1 million+. CIBC is offering 5½% on savings account deposits above $1 million via its Simplii-branded HISA.
CIBC and National Bank seem to have plenty of capacity for short term deposits. In addition their share of the $2 billion in HSAV, the two banks have 82% of $4 billion in the more conventional Horizons High Interest Savings ETF (CASH) and 46% of $8.74 billion in the CI High Interest Savings ETF (CSAV).
8:02 pm
August 4, 2010
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Those two also have 63.08% of the $5.7 billion in Progress's PSA ETF (Scotia has the rest). PSA is showing a gross yield of 5.39%, presumably that's effectively the weighted average of the rates those banks are paying (its 5.23% yield after MER). Obviously, they can find profitable uses for chunks of short term deposit money at those rates, although presumably they may start ticking down a bit as GIC rates are.
5:39 am
March 30, 2017
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Norman1 said
savemoresaveoften said
There is also the limiting factor the agreement with NA and CM how big a program they need. Sourcing their funding at 5%+ is not the cheapest according to the bank's treasurer.
5% is the going rate for short term funds. Scotia iTRADE is offering Government of Canada treasury bills that mature next week (December 7) yielding 5.02%. Scotia iTRADE is also offering Bank of Nova Scotia ISA, Series F yielding 5%. RBC's prime-linked cashable GIC pays 5.20% on $1 million+. CIBC is offering 5½% on savings account deposits above $1 million via its Simplii-branded HISA.
CIBC and National Bank seem to have plenty of capacity for short term deposits. In addition their share of the $2 billion in HSAV, the two banks have 82% of $4 billion in the more conventional Horizons High Interest Savings ETF (CASH) and 46% of $8.74 billion in the CI High Interest Savings ETF (CSAV).
Yes they are able to deploy funds that were funded at 5% and make money off it (it seems). However I am quite sure they have a master agreement in place with Horizons re the size of the program. HSAV deposit can be a lot more volatile than GICs and other savings account deposits potentially. Why run a massive gap risk just so Horizon can enjoy their fee with no risk at all. And as you already mentioned, there is only so much expense maneuvering Horizon can do before attracting the authority to step in and stop the music.
So it seems like 2B or so it seems is the equilibirum point right now.
If anything, right now its basically 100% NA. So maybe combined the size could have been $4B if both banks have same commitment. Just that Horizons has to slow/stop it for their own purposes.
7:47 am
August 14, 2023
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mordko said
He is talking about minimizing interest and maximizing capital gains. That applies to non-registered accounts. You are talking about a non-tsxable account so irrelevant. Even in taxable accounts this type of masochism would be waste of time and effort for most people.
Back to your question… You can move money in and out any HISA ETF. There is a cost to doing that though, including spread and fees that your brokerage may charge.
Honestly, you may want to stick with standard HISAs.
Actively trading HISA ETFs is child's play. The rest of the market is masochism.
CASH, ZMMK ETFs are standard HISA ETFs. It's how you use them. I use the spread to my advantage and I actively trade them in a no trade fee brokerage.
At some point I will tally up the numbers of actively trading these ETFs and compare to just leaving my funds in place. I share the data.
Trader first, Saver second
8:47 am
April 27, 2017
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Glad you are doing this. Helps to subsidize market makers and, ultimately, the rest of us. Great work, well worth the effort.
Many thanks!
12:07 am
November 22, 2023
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TINAisOver said
I took points of the NAV price and plotted those values at about 6 months apart placed it on the market chart.
ETF is trading as expected. Market price is being set by traders because of the lack of supply of shares. In my opinion , I think Horizons is satisfied with its price action. I think it will attract more investors.
Thank you @TINAisOver for putting this market vs NAV price chart together. It's exactly what I was looking for! Can you share what you used (e.g. app?) to do this?
12:10 am
November 22, 2023
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TINAisOver said
I can see , Canuckles, what you aim to achieve. I may have a solution for you. I don't know what your time horizon is, but you mention "temporary". Instead of HSAV. Use one or a handful of the regular HISA ETFs. Buy them on ex-div. day and sell the day before the next ex-div. day and repeat the process. This will give you the longest strech of gain. I 'm not positive on this, but I expect this will produce a capital gain. I need to do more research to confirm the tax implications, but I'm fairly sure it does. Almost all my available cash that is not in stocks or ETFs are in HISA ETFs and I'm constantly going in and out of them, including today , ZMMk's ex-Div day is tomorrow. I mostly use ZMMK, CASH and to a lesser extent CMR. I prefer CASH as my number one, but this month the clear winner is ZMMK. Flipped it many times intraday this month and today is selling at a premium. Should my shares sell 50.10 today, I will buy it back tomorrow in a trading range of 49.88-90. Else, I may decide to sell @50.09 before close, still .5 above Div. ,or keep the Dividend. If I sell and buy back below 49.90 it's an additional slight gain. = to an even capital gain, and above it a slight loss of potential earnings. If your mission is to avoid interest income taxed at the highest level this may be your option. You can do this until should there be a favourable entry point for HSAV. Downside is it requires work , not much, at least 2 days a month per ETF. You will likely gain less than the total monthly dividend, 1-3 cents less. But still be in a better tax position.
Interesting idea, thanks for sharing TINAisOver! I'm not sure if I'll buy enough to make this worth it. It's great food for thought though!
12:22 am
November 22, 2023
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Norman1 said
…
HSAV and some other Horizon ETF's are different classes of shares of a mutual fund corporation named Horizons ETF Corporation.
The banks are paying interest on the deposits for the HSAV class shares to Horizons ETF Corporation. On the corporate tax return for Horizons ETF Corporation, that interest is shielded from taxation using the deductions for the HSAV's 0.18% MER and some of the deductions for the MER of the other funds in the same mutual fund corporation.
If there's $2 billion of HSAV deposits earning 5%, then there will be $100 million of interest received from the banks. Deduction of HSAV's own 0.18% MER will shield $3.6 million of the interest.
The remaining $96.4 million of interest can be shielded from taxation with the deduction for, as an example, the 0.10% MER for $96.4 billion of the holdings of HXS, the Horizons S&P 500 Index ETF.
Thanks for this explanation Norman1! Good to know how Horizons can do this.
12:41 am
November 22, 2023
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Thanks again for everyone's thoughts. If I invest in this ETF, I think I'll treat the commitment level like a GIC..or perhaps a cashable GIC. It wouldn't have the no risk deposit/withdrawal flexibility that I have with a HISA. As such, I'd only put a portion of my savings in it. The cost/benefit analysis of this ETF is also not as appealing if I compare it to a GIC as the rates available are currently higher.
I'm going to monitor this ETF for now. The current HISA and GIC rates available are still pretty good so I'm not in a rush. I'm interested to see how this ETF reacts as interest rates come down. The cost benefit analysis will be interesting to compare at lower rates too.
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