{"id":10757,"date":"2018-10-22T16:23:20","date_gmt":"2018-10-22T16:23:20","guid":{"rendered":"http:\/\/hamilton.fundzen.com\/?page_id=10757"},"modified":"2024-03-07T16:51:56","modified_gmt":"2024-03-07T21:51:56","slug":"etfs-faq","status":"publish","type":"page","link":"https:\/\/hamilton.fundzen.com\/etfs-faq\/","title":{"rendered":"ETFs FAQ"},"content":{"rendered":"<div class=\"tabs\">\n<ul class=\"tabs-list\">\n<li class=\"active\"><a href=\"#tab1\">Buying &amp; Selling ETFs<\/a><\/li>\n<li><a href=\"#tab2\">Distributions, Taxes &amp; Fees<\/a><\/li>\n<li><a href=\"#tab3\">Covered Call ETFs<\/a><\/li>\n<\/ul>\n<div id=\"tab1\" class=\"tab active\">\n<h4>General ETFs FAQ<\/h4>\n<div class=\"accordion\">\n<div class=\"accordion-box\">\n<div id=\"#how-can-i-buy-etf\" class=\"accordion-header\">\n<h5>HOW CAN I BUY &amp; SELL HAMILTON ETFs? CAN I PURCHASE HAMILTON ETFs DIRECTLY FROM HAMILTON ETFs?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>Hamilton ETFs is an investment fund manager and ETF issuer, with our ETFs all trading on the Toronto Stock Exchange (TSX). In order to buy and sell Hamilton ETFs, retail investors must use an investment brokerage or financial advisor. Hamilton ETFs cannot provide investment advice, accept trading orders, or open investment accounts.<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>CAN U.S. RESIDENTS BUY HAMILTON ETFs?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>All Hamilton ETFs trade on the Toronto Stock Exchange (TSX), which is internationally recognized. Hamilton ETFs can be bought and sold on the TSX from brokerages that allow international trading. We recommend you contact your brokerage and inquire about how you can get access to international trading, in particular with ETFs that trade on the TSX.<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>CAN EU RESIDENTS BUY HAMILTON ETFs? WHERE CAN I FIND MiFID II &amp; PRIIP INFORMATION?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>\n<p>Effective January 2018, the expanded <strong>Markets in Financial Instruments Directive<\/strong> (\u201cMiFID II\u201d) and <strong>Packaged Retail and Insurance-based Investment Products<\/strong> (\u201cPRIIP\u201d) regulations within the European Union (&#8220;EU&#8221;) were implemented to regulate EU investment managers and broker-dealers and enhance disclosure for the buy and sell-side regarding investment products.<\/p>\n<p>Hamilton ETFs does not carry on business activities in the EU and is not subject to these disclosure requirements. However, we note that, generally speaking, our Fact Sheet and the regulatory ETF Facts document (both found in the \u2018Documents\u2019 tab of each ETF page), combined, provide comparable relevant information about each ETF. These documents, combined with all other disclosure contained on our site (such as each product\u2019s Legal Entity Identifier (LEI) number, found in the \u2018Fund Details\u2019 table of each ETF page), should provide sufficient information to any EU distributor in order for them to comply with regulations.<\/p>\n<p>Further, while we note that Hamilton ETFs does not typically engage in broker-commission soft dollar arrangements, the Financial Statements (found in the \u2018Documents\u2019 tab of each ETF page) of each ETF will identify the value of any such arrangements.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>ETF PRICING &amp; LIQUIDITY<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>When buying or selling a stock, its liquidity \u2014 the ready availability of both buyers and sellers \u2014 is often a concern. It\u2019s important for investors to remember that an ETF\u2019s true (or \u2018implied\u2019) liquidity is measured by the liquidity of its underlying portfolio, not the trading volume of the ETF itself. Hamilton ETFs underlying portfolios have substantial liquidity. See the following section on Market Makers for more information.<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>WHAT IS A MARKET MAKER &amp; HOW DO THEY PROVIDE ON-DEMAND ETF LIQUIDITY?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>Market makers provide liquidity and depth to markets and profit from the difference in the bid-ask spread. The market makers for Hamilton ETFs are National Bank Financial, BMO and TD, which can create\/redeem units of our ETFs at their discretion. This \u2018service\u2019 is reflected in an ETF\u2019s bid\/ask prices, resulting in a modestly higher spread (typically a few cents) vs the ETFs underlying net asset value (NAV). Importantly, the greater liquidity of the underlying portfolio, the tighter the spread of the ETF market price.<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>IS NAV PRICING EFFICIENT?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>Yes. The substantial liquidity of our underlying portfolios means there is, over time, no material difference between the NAV and the trading price of the fund, unlike closed end funds.<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>ARE HAMILTON ETFs ELIGIBLE FOR REGISTERED ACCOUNTS?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>All Hamilton ETFs are eligible to be held in the following registered accounts: RRSP, RRIF, DPSP, RDSP, FHSA, RESP and TFSA.<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>TIPS FOR PLACING ETF ORDERS<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>We recommend using limit orders when placing trades to ensure an efficient fill. We also suggest avoiding trading in the first and last 10 minutes of market hours when the prices of the underlying securities tend to be more volatile.<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div id=\"tab2\" class=\"tab\">\n<h4>Distributions, Taxes and Fees FAQs<\/h4>\n<div class=\"accordion\">\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>WHEN CAN I EXPECT TO RECEIVE CASH DISTRIBUTIONS FROM HAMILTON ETFs?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>\n<p>Hamilton ETFs pay distributions on either a monthly or quarterly basis (see fund details table of the respective ETF for more info). Each month, we announce the upcoming distribution amounts, current yields, and anticipated ex-dividend and pay dates in our <a href=\"https:\/\/hamiltonetfs.com\/category\/press-releases\/\">Press Releases<\/a>. In general, for our ETFs, the ex-dividend date is the second to last business day of the month, and the payment date for cash distributions is 6 business days after the ex-date.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>DO HAMILTON ETFs OFFER A DRIP (DISTRIBUTION REINVESTMENT PROGRAM)?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>\n<p>Yes, all Hamilton ETFs are eligible for DRIP. If you own a Hamilton ETF, you may enroll in the DRIP program by contacting your investment brokerage. Hamilton ETFs administers a Treasury DRIP; whereby enrolled investors automatically have their distributions reinvested in additional shares of the ETF. DRIP shares are issued at a share price equal to the average closing price of the ETF on the Toronto Stock Exchange (TSX) for the five consecutive trading days immediately prior to the applicable payment date. In the event that there were no prices, NAVs are used. Any remaining fractional values are distributed in cash to unitholders instead of fractional shares.<\/p>\n<p>Note, each brokerage has their own criteria for whether they allow DRIP for certain funds. If DRIP isn\u2019t currently available at your brokerage, we recommend you contact them to inquire and request that they make it available. Please note, with certain brokers, there may be a slight delay for DRIP shares to be reflected in your account. We recommend you contact your broker to inquire about any delays.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>HOW ARE HAMILTON ETFs TAXED &amp; ARE THEY ELIGIBLE FOR THE CANADIAN DIVIDEND TAX CREDIT?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>\n<p><a href=\"https:\/\/hamiltonetfs.com\/tax-information\/\">CLICK HERE<\/a> to view our <em><strong>Tax Information<\/strong><\/em>. The characterization of distributions for tax purposes will not be known until after the ETF\u2019s tax year end. Investors will be informed of the characterization of the amounts distributed for tax purposes only for the entire year and not with each distribution. These amounts will be reported to brokers and relayed to you on official tax statements from your broker. These amounts and proportions may vary from year to year.<\/p>\n<p>For our ETFs that hold Canadian dividend-paying companies, there may be a portion of the total distribution that could be eligible for the Canadian Dividend Tax Credit.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>MANAGEMENT FEE VS MANAGEMENT EXPENSE RATIO (MER)<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>\n<p>Management Fees are the costs that a unitholder pays to Hamilton ETFs for managing the ETF. The Management Expense Ratio (MER), which is published in our semi-annual and annual financial statements, represents the total cost of an ETF including: management fees paid to manager, taxes, operating expenses such as legal fees, auditing, and administrative costs. For our <em>Enhanced<\/em> ETFs, the MER also includes the cost of the loan facility (institutional borrowing rates; 25% modest cash leverage). Management Fees and MERs are expressed as a percentage of the fund\u2019s average assets for the year and are deducted on a daily, prorated basis and are reflected in the net asset value of the fund.<\/p>\n<p>It is important to note that performance and yield data published on our website is reported <em><span style=\"text-decoration: underline;\">after<\/span><\/em> deducting the MER (i.e., performance, yields, and cash distributions are already <em><span style=\"text-decoration: underline;\">net<\/span><\/em> of fees).<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div id=\"tab3\" class=\"tab\">\n<h4>Covered Call ETFs FAQs<\/h4>\n<div class=\"accordion\">\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>WHAT ARE COVERED CALLS &amp; HOW DO THEY GENERATE MORE INCOME?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>\n<p>Covered Call ETFs aim to generate higher income by investing in a portfolio of stocks while writing\/selling call options on a portion of the underlying securities in exchange for a fee\/premium.<\/p>\n<p><script src=\"https:\/\/fast.wistia.com\/embed\/medias\/il6qyr2p4j.jsonp\" async><\/script><script src=\"https:\/\/fast.wistia.com\/assets\/external\/E-v1.js\" async><\/script><span class=\"wistia_embed wistia_async_il6qyr2p4j popover=true\" style=\"display: block; height: 270px; position: relative; width: 480px; text-align: center; margin: auto;\">\u00a0<\/span><\/p>\n<p>A call option gives the buyer the right, but not the obligation, to buy a stock at a fixed price within a specific period (typically 1-2 months). The buyer pays a premium to the seller for that right. By selling call options, the portfolio is able to supplement dividend income with additional cashflows in the form of premium income. Covered call strategies are often considered a defensive strategy as equity downside risk is reduced by the option premium in falling markets.<\/p>\n<p>Notably, there is a trade-off between income and growth potential. Writing options caps the upside growth potential of the portfolio that is covered, in exchange for a higher yield.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>HOW DO COVERED CALL ETFs GENERATE \u2018TAX EFFICIENT\u2019 INCOME?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>\n<p>Distributions from Hamilton ETFs\u2019 covered call ETFs are composed of dividends earned on their holdings and options premiums from writing covered calls, less fees, taxes, expenses. Earnings from covered calls are generally taxed as capital gains or return of capital (ROC), which are considered \u2018tax efficient\u2019 relative to interest income (see example below for more details).<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"accordion-box\">\n<div class=\"accordion-header\">\n<h5>WHAT IS RETURN OF CAPITAL &amp; AM I JUST GETTING MY OWN MONEY BACK (\u2018NAV EROSION\u2019)?<\/h5>\n<div class=\"fa fa-minus\"><\/div>\n<\/div>\n<div class=\"accordion-body\">\n<div>\n<p>It is important to differentiate the source of the income being generated from the tax characterization of that income. While individual circumstances may vary, below is a general example.<\/p>\n<p>Covered call option premium, from a tax perspective, is initially considered a capital gain.<\/p>\n<ul>\n<li><strong>Scenario 1:<\/strong> An ETF with a starting NAV of $10 generates and pays out $1 of option premium in the form of distributions. All else equal, the investor would receive a tax slip with $1 of capital gain, the NAV would remain at $10, and your adjusted cost base (ACB) would be unchanged.<\/li>\n<li><strong>Scenario 2:<\/strong> An ETF with a starting NAV of $10 generates $0 of option premium and still pays out $1 in distributions. All else equal, the investor would receive a tax slip with $1 in return of capital, the NAV would drop to $9, and your ACB would be reduced by $1.<\/li>\n<li><strong>Scenario 3:<\/strong> An ETF with a starting NAV of $10 generates and pays out $1 of option premium in the form of distributions. If the ETF had any realized or carry forward tax losses, that could be applied to the option premium capital gain. All else equal, the investor would receive a tax slip with $1 in return of capital, the NAV would remain $10, and your ACB would be reduced by $1.<\/li>\n<\/ul>\n<p>The above is a simplified example meant to illustrate why investors may see a higher proportion of ROC in covered call ETF tax reporting and help explain the different sources of income. There are other factors influencing the NAV of the fund but importantly, the income generated from the covered call strategy plus distributions received from the underlying are sufficient enough to support the elevated distributions paid to investors.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Buying &amp; Selling ETFs Distributions, Taxes &amp; Fees Covered Call ETFs General ETFs FAQ HOW CAN I BUY &amp; SELL HAMILTON ETFs? CAN I PURCHASE HAMILTON ETFs DIRECTLY FROM HAMILTON ETFs? Hamilton ETFs is an investment fund manager and ETF issuer, with our ETFs all trading on the Toronto Stock Exchange (TSX). In order to buy and sell Hamilton ETFs, retail investors must use an investment&hellip;<\/p>\n","protected":false},"author":11,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_custom_body_class":"","_custom_post_class":"","content-type":""},"acf":[],"_links":{"self":[{"href":"https:\/\/hamilton.fundzen.com\/wp-json\/wp\/v2\/pages\/10757"}],"collection":[{"href":"https:\/\/hamilton.fundzen.com\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/hamilton.fundzen.com\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/hamilton.fundzen.com\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/hamilton.fundzen.com\/wp-json\/wp\/v2\/comments?post=10757"}],"version-history":[{"count":54,"href":"https:\/\/hamilton.fundzen.com\/wp-json\/wp\/v2\/pages\/10757\/revisions"}],"predecessor-version":[{"id":18608,"href":"https:\/\/hamilton.fundzen.com\/wp-json\/wp\/v2\/pages\/10757\/revisions\/18608"}],"wp:attachment":[{"href":"https:\/\/hamilton.fundzen.com\/wp-json\/wp\/v2\/media?parent=10757"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}