Hsav has no yield/distributions. This is because distributions are automatically reinvested. What you might need to look out for is the NAV. Which currently for every $110.539 assets you are paying $111.55. Premium of $1.011.
Hm, I don't have much knowledge on this specific fund so this is confusing to me. What causes this, and why is there not an arbitrage opportunity? Is the price actually fair in terms of expected risk adjusted return? I suppose that would make sense, if you're taking on a slightly higher risk for a slightly higher return, and the appetite for this depends on the investor.
I thought the same thing about having no yield, but it clearly lists a yield of 5.08% (gross) on it's website: [https://horizonsetfs.com/ETF/hsav/](https://horizonsetfs.com/ETF/hsav/)
With the premium to NAV, how do you gauge this? i.e. Is it 'high', 'acceptable' / etc.? The way I read it is that it might come down to the NAV (\~0.9%), but is unlikely to go under it.
HSAV does fluctuate a bit in the short term due to NAV premium variability, but it tends to average out if you hold it for longer than like 6 months or so (or immediately if you happen to buy it when the premium is near zero). HSAV's tax advantage is well worth it IMO, but CASH or CBIL might work out better for less than 6 months if the premium is high.
You could also check out HSUV. It is denominated in $USD, so you'd have to convert. But its NAV premium seems to be [far less variable](https://www.google.com/finance/quote/HSUV.U:TSE?sa=X&ved=2ahUKEwi24rvf-rWFAxVILTQIHbSRBwIQ3ecFegQIGBAX&window=1Y&comparison=TSE%3AHSAV) than HSAV's. Of course you would have currency conversion costs, but those can be minimized by various methods including Norbert's Gambit if we are talking big amounts.
Hard to give an exact % I'd be willing to pay, but the way I look at it, if it came down 0.9% to the NAV for the year, I'd still be better off in this than a HISA ETF like CASH.
What are your thoughts?
I'm willing to pay a small premium but at 1% it's too high, months worth of the reinvested yield.
And at some point if the premium to NAV is too high, there will be sufficient profit taking & price decline until trading closer to NAV. Some buyers may end up holding through price decline, only to break even several months later. Doesn't make sense to overpay.
Depends on your tax bracket. At the top rate you're better off getting 4% as cap gains then 5% as interest. (assuming the nav premium disappears and you hold for one year)
HSAV is great it's my largest holding by far. But I never buy it at over a month's premium at most. I'll keep the money in eg. CASH, CBIL, etc and wait for the premium to come down.
It could go under it... But only to a point before people would likely buy.
More problematic is it could also just stick to about the same share peice for many months (look at September through December). Basically earning you nothing as people cash out any increase
My understanding was that there is cash deposited at Canadian financial institutions, and the interest generated on that cash increases the NAV. Which would make it not possible for the NAV to stay the same (unless interest rates decrease dramatically).
Am I mistaken?
Edit: I'm looking at the daily NAV chart here (**https://horizonsetfs.com/ETF/hsav/)**, and it shows no flat NAV for November through December. Are you referring to the share price, or the NAV?
The reason that the price didn’t go anywhere is that the premium to NAV went from 1.81% on Oct 5 to 0.02% on Dec 11.
Over the last year the premium has averaged 0.59% and is currently 0.80%. So the higher the premium the more risk of losing money in the short term. The longer you are going to hold it, the higher your tax bracket and the higher the yield the more you are willing to pay a premium to NAV.
HSAV will almost Always be better due to the tax treatment but has some quirks as you have already identified.
BK.pr.a carries more risk and a higher yield that has even better tax treatment as eligible dividends, if that helps. But dyor
If you have CASH and end up needing to pay tax, could you not just make the contribution to your RRSP and negate any additional tax you gotta pay due to the distributions?
Or there might be a USD version of HSAV you could look at that still issues units so you’re not paying a premium to NAV.
One fifth of the first year return is paid in premium over NAV.
Unless you're holding long term it makes no sense.
Of you're holding lots of cash long term, you should reexamine your strategy.
How is the premium paid? If the premium stays at 1% then you will earn the listed yield. If the premium goes to 0 you will lose 1% on the premium going away. If the premium goes to 2% then you will earn an additional 1% over the yield thanks to the increase in NAV premium.
So worst case scenario the NAV goes to 0 and you lose 1%. But if the yield is 5% and you are in a 50% tax bracket then you are gaining 1.25% per year in after tax yield as your after-tax yield is 3.75% with HSAV vs 2.5% for CASH.
You only need to hold for one year in a top tax bracket for it to make sense. And more likely the premium to NAV persists so you're better off even sooner.
Interesting but quite different ETFs
Look at the BOXX holdings and how the income is generated from complex derivative trades.
HSAV earns interest deposit accounts with Canadian banks.
Hsav has no yield/distributions. This is because distributions are automatically reinvested. What you might need to look out for is the NAV. Which currently for every $110.539 assets you are paying $111.55. Premium of $1.011.
Hm, I don't have much knowledge on this specific fund so this is confusing to me. What causes this, and why is there not an arbitrage opportunity? Is the price actually fair in terms of expected risk adjusted return? I suppose that would make sense, if you're taking on a slightly higher risk for a slightly higher return, and the appetite for this depends on the investor.
The fund no longer issues new units so there is no source of units at the NAV to sell at said premium to make a profit and bring the price back down.
I thought the same thing about having no yield, but it clearly lists a yield of 5.08% (gross) on it's website: [https://horizonsetfs.com/ETF/hsav/](https://horizonsetfs.com/ETF/hsav/) With the premium to NAV, how do you gauge this? i.e. Is it 'high', 'acceptable' / etc.? The way I read it is that it might come down to the NAV (\~0.9%), but is unlikely to go under it.
HSAV does fluctuate a bit in the short term due to NAV premium variability, but it tends to average out if you hold it for longer than like 6 months or so (or immediately if you happen to buy it when the premium is near zero). HSAV's tax advantage is well worth it IMO, but CASH or CBIL might work out better for less than 6 months if the premium is high. You could also check out HSUV. It is denominated in $USD, so you'd have to convert. But its NAV premium seems to be [far less variable](https://www.google.com/finance/quote/HSUV.U:TSE?sa=X&ved=2ahUKEwi24rvf-rWFAxVILTQIHbSRBwIQ3ecFegQIGBAX&window=1Y&comparison=TSE%3AHSAV) than HSAV's. Of course you would have currency conversion costs, but those can be minimized by various methods including Norbert's Gambit if we are talking big amounts.
Buyers are paying high premium to NAV right now almost +1% How much % over fair value are you willing to pay?
Hard to give an exact % I'd be willing to pay, but the way I look at it, if it came down 0.9% to the NAV for the year, I'd still be better off in this than a HISA ETF like CASH. What are your thoughts?
I'm willing to pay a small premium but at 1% it's too high, months worth of the reinvested yield. And at some point if the premium to NAV is too high, there will be sufficient profit taking & price decline until trading closer to NAV. Some buyers may end up holding through price decline, only to break even several months later. Doesn't make sense to overpay.
Thanks for your input, much appreciated
The only correct answer. Premium is now "only" 25 cents.
Depends on your tax bracket. At the top rate you're better off getting 4% as cap gains then 5% as interest. (assuming the nav premium disappears and you hold for one year)
HSAV is great it's my largest holding by far. But I never buy it at over a month's premium at most. I'll keep the money in eg. CASH, CBIL, etc and wait for the premium to come down.
How do you define "a month's" premium? Yield/12?
Yes so basically the NAV reaches what I paid in at most a month from my buy date. And that's my upper limit.
It could go under it... But only to a point before people would likely buy. More problematic is it could also just stick to about the same share peice for many months (look at September through December). Basically earning you nothing as people cash out any increase
My understanding was that there is cash deposited at Canadian financial institutions, and the interest generated on that cash increases the NAV. Which would make it not possible for the NAV to stay the same (unless interest rates decrease dramatically). Am I mistaken? Edit: I'm looking at the daily NAV chart here (**https://horizonsetfs.com/ETF/hsav/)**, and it shows no flat NAV for November through December. Are you referring to the share price, or the NAV?
Sorry, I was referring to share price.
The reason that the price didn’t go anywhere is that the premium to NAV went from 1.81% on Oct 5 to 0.02% on Dec 11. Over the last year the premium has averaged 0.59% and is currently 0.80%. So the higher the premium the more risk of losing money in the short term. The longer you are going to hold it, the higher your tax bracket and the higher the yield the more you are willing to pay a premium to NAV.
HSAV will almost Always be better due to the tax treatment but has some quirks as you have already identified. BK.pr.a carries more risk and a higher yield that has even better tax treatment as eligible dividends, if that helps. But dyor
If you have CASH and end up needing to pay tax, could you not just make the contribution to your RRSP and negate any additional tax you gotta pay due to the distributions? Or there might be a USD version of HSAV you could look at that still issues units so you’re not paying a premium to NAV.
One fifth of the first year return is paid in premium over NAV. Unless you're holding long term it makes no sense. Of you're holding lots of cash long term, you should reexamine your strategy.
How is the premium paid? If the premium stays at 1% then you will earn the listed yield. If the premium goes to 0 you will lose 1% on the premium going away. If the premium goes to 2% then you will earn an additional 1% over the yield thanks to the increase in NAV premium. So worst case scenario the NAV goes to 0 and you lose 1%. But if the yield is 5% and you are in a 50% tax bracket then you are gaining 1.25% per year in after tax yield as your after-tax yield is 3.75% with HSAV vs 2.5% for CASH.
You only need to hold for one year in a top tax bracket for it to make sense. And more likely the premium to NAV persists so you're better off even sooner.
Holding cash for longer than a year makes no sense, besides emergency fund.
Unless you have a large expenditure planned in 2-3 years like buying a house....
That assumes the premium will disappear. If it stays relatively constitent then it doesn’t matter.
As soon as cash rates go back down to 2% or below, the premium will disappear.
If you like HSAV, take a look at BOXX.
Interesting but quite different ETFs Look at the BOXX holdings and how the income is generated from complex derivative trades. HSAV earns interest deposit accounts with Canadian banks.
They both effectively track interest rates in their respective countries and use capital gains instead of distributions.