Q: Hello 5i,
I would like to buy HSAV.ca for a 1 year hold but I’m concerned about the erosion of the .62% premium and
price in a declining rate environment. I appreciate your thoughts. Would you still consider it a buy. It seems to be the only tax efficient HSIA available in Canada so perhaps it will always maintain its demand. Thank you.
Brad
I would like to buy HSAV.ca for a 1 year hold but I’m concerned about the erosion of the .62% premium and
price in a declining rate environment. I appreciate your thoughts. Would you still consider it a buy. It seems to be the only tax efficient HSIA available in Canada so perhaps it will always maintain its demand. Thank you.
Brad
5i Research Answer:
HSAV currently has a 0.54% premium to its NAV, but its net yield is 4.9%. Investors buying HSAV should be prepared for the premium to disappear at any point, but given at least a year of holding and no yield reductions, the annual yield is still around 4.4%.
There is a likelihood that the premium does not erode over time, but we consider the markets in the long run to be fairly efficient, and we could see another asset manager creating a tax-efficient HISA ETF that would create competition and thus reduce the premium. We continue to like the ETF, and even though it trades at a premium to its NAV, we consider it to still be an attractive option for investors looking for tax-efficient HISA ETFs.