Brompton Funds Limited expanded the currency options available on one of its preferred-share strategies on September 14, launching U.S.-dollar-denominated units of the Brompton Split Corp. Preferred Share ETF on the Toronto Stock Exchange. The new units trade under the ticker SPLT.U, alongside the existing Canadian-dollar units trading as SPLT.

The move does not create a separate investment mandate. Instead, SPLT.U provides another unit class through which investors can access the ETF’s actively managed portfolio of preferred shares issued primarily by Canadian split share corporations. Purchases and sales of the USD units, as well as cash distributions on those units, are made in U.S. dollars. Brompton said it seeks to hedge substantially all of the direct Canadian-dollar exposure attributable to SPLT.U back to the U.S. dollar.

The currency treatment is central to the new offering. The securities underlying the strategy are predominantly Canadian assets, so a U.S.-dollar investor accessing an unhedged Canadian portfolio would ordinarily be exposed to movements in the Canadian dollar against the U.S. dollar in addition to changes in the value and income of the underlying preferred shares. SPLT.U is designed to substantially reduce that direct currency exposure through hedging while allowing investors to transact and receive distributions in U.S. dollars.

For investors already maintaining U.S.-dollar balances, the new class may provide a more direct operational route into the strategy. Investors using the Canadian-dollar units may otherwise need to convert currencies when funding purchases or converting distributions into U.S. dollars, depending on their account structure and brokerage arrangements. SPLT.U does not eliminate investment risk or guarantee a particular currency outcome, but it separates the choice of settlement currency from the fund’s underlying Canadian split-share preferred strategy.

Brompton also announced the first distribution for the USD units. SPLT.U holders of record on September 30 are scheduled to receive US$0.055 per unit on October 8. Monthly distributions are one of the ETF’s stated investment objectives, together with an opportunity for capital preservation. Distribution amounts can change and should not be interpreted as guaranteed returns.

The ETF seeks to meet those objectives primarily by investing in preferred shares issued by Canadian split share corporations listed on Canadian exchanges. Its mandate also permits investments in preferred shares of other issuers, ETFs, other investment funds, equities, income-generating securities and convertible securities when Brompton determines those holdings are consistent with the fund’s objectives.

Split share corporations occupy a distinctive segment of the Canadian income market. These vehicles generally divide economic exposure to a portfolio between preferred shares and Class A shares. Preferred shareholders typically receive defined distributions and have a senior claim on the corporation’s assets relative to Class A shareholders, while the Class A securities generally absorb more of the portfolio’s upside and downside. Exact terms vary by issuer, including distribution rates, maturity provisions, redemption arrangements and asset-coverage requirements.

That structure can give split corporation preferred shares characteristics that differ from both conventional corporate bonds and traditional preferred shares issued directly by operating companies. Their performance can depend not only on interest rates and market yields but also on the value of the underlying portfolio, the amount of asset coverage supporting the preferred shares, the remaining term of the security and conditions in the secondary market.

Brompton positions SPLT as a diversified way to access that market rather than requiring investors to select individual split-share preferred issues. The fund is actively managed and carries a 0.50% management fee, according to Brompton’s fund profile. The manager can adjust holdings as valuations, credit characteristics, asset coverage, maturities and relative opportunities change across the split-share market.

As of September 11, Brompton reported approximately C$739 million in total assets for the ETF. The Canadian-dollar units had a net asset value of C$11.09 and a market price of C$11.11 at that date, with the fund displaying a distribution yield of approximately 5.94%. Brompton’s profile also showed an initial US$11.00 net asset value for the USD units before the September 14 exchange-trading launch.

The portfolio remains concentrated in the Canadian split-share preferred universe. A July 31 portfolio snapshot showed the largest positions including preferred shares of Dividend 15 Split Corp., Dividend Growth Split Corp., North American Financial 15 Split Corp., Canadian Banc Corp. and Life & Banc Split Corp. Those five positions together represented more than half of the portfolio at that reporting date, illustrating both the fund’s specialization and the importance of financial-sector-linked split-share structures within the market.

The fund can also hold positions outside traditional split corporation preferred shares where permitted by its mandate. Brompton’s July portfolio disclosure, for example, included a smaller allocation to its Wellington Square AAA CLO ETF alongside the preferred-share holdings. The investment portfolio can change as the manager trades securities, so individual weightings are snapshots rather than permanent allocations.

SPLT’s existing Canadian-dollar units began operations on June 12, 2023. Brompton reported that the CAD units generated an annualized compound return of 9.7% from inception through August 31, 2026. The manager also reported a 5.4% one-year return and a 9.7% three-year annualized return through the same date. Those figures are calculated using net asset value and assume reinvestment of distributions. They are historical results rather than forecasts for either SPLT or the newly launched SPLT.U class.

The launch therefore arrives after the underlying strategy has established a multi-year operating record and accumulated substantial assets. Adding SPLT.U allows Brompton to broaden distribution of the same investment concept without requiring investors to accept Canadian-dollar settlement. Similar dual-currency structures are already used elsewhere in the Canadian ETF market, particularly for funds aimed at investors who routinely hold both Canadian and U.S. dollars.

Brompton itself operates U.S.-dollar units for several other funds, including preferred-share, financial, healthcare and fixed-income strategies. The addition of SPLT.U extends that approach to its split corporation preferred-share portfolio and gives the manager another product capable of serving accounts with U.S.-dollar cash balances or U.S.-dollar income requirements.

Currency hedging remains an important distinction between a USD-denominated unit and a simple U.S.-dollar trading line. Brompton said it intends to hedge substantially all direct Canadian-dollar exposure attributable to the USD units into U.S. dollars. Such hedges typically require derivatives or other currency transactions that can introduce costs, tracking differences and counterparty exposure. They also may not perfectly offset every movement in the exchange rate or every indirect currency exposure embedded in underlying investments.

For that reason, SPLT.U should not be viewed as converting the underlying portfolio into U.S. assets. The economic exposure continues to derive principally from preferred shares of Canadian split share corporations. The U.S.-dollar unit instead changes the settlement and distribution currency and overlays a currency-management process intended to substantially reduce direct Canadian-dollar fluctuations for holders of that class.

The ETF’s broader risks also remain unchanged by the new denomination. Preferred-share valuations can respond to changes in interest rates, credit conditions and required yields. Split-share securities can be affected by declines in the market value of the assets supporting the structure, while individual issues may have different redemption dates and liquidity characteristics. Brompton’s fund profile classifies the ETF’s risk rating as low, but the fund is not guaranteed and its market price and net asset value can fluctuate.

The fund is also permitted to use leverage of up to 15% of net asset value. Leverage can increase exposure to income-producing securities and potentially enhance returns, but it can also magnify losses and financing costs during unfavorable market conditions. Investors assessing the USD units therefore need to consider both the underlying portfolio risks and the additional mechanics associated with the currency hedge.

Tax treatment is another consideration for investors using the strategy for income. Brompton says distributions from split corporation preferred shares are typically eligible Canadian dividends, which may receive different tax treatment from ordinary interest income for certain Canadian taxable investors. However, the precise character of an ETF distribution can vary, and receiving the payment in U.S. dollars does not by itself determine its tax classification. Account type, investor residency and the fund’s distribution composition can all affect the ultimate tax result.

The September launch follows an amendment to the Brompton ETFs prospectus dated August 31, which Brompton said was filed with securities regulators in every Canadian province and territory. The amendment established the framework for the USD units and their currency-hedging policy before exchange trading began.

From an ETF product-development perspective, SPLT.U represents a targeted extension rather than a new portfolio strategy. Brompton is using an additional unit class to address currency preference while preserving the income and capital-preservation objectives of the existing fund. That approach can allow assets associated with multiple currency classes to support the same core investment process rather than fragmenting exposure across separate portfolios.

The market response will ultimately depend on whether investors seeking U.S.-dollar income view split-share preferred securities as an attractive complement to traditional bonds, conventional preferred shares and other income ETFs. Yield levels, Canadian interest-rate expectations, asset coverage within split-share corporations and the relative strength of the Canadian and U.S. dollars will all influence demand.

For Brompton, the immediate significance is broader access to a strategy that has grown to hundreds of millions of dollars since its 2023 launch. For investors, SPLT.U adds a currency-management option without materially changing the core proposition: diversified, actively managed exposure to Canadian split corporation preferred shares, monthly cash distributions and an investment objective that emphasizes capital preservation alongside income.