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Index Linked Funds, The good, the bad and the ugly
nipper
post Posted: Oct 19 2020, 11:22 AM
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from Betashares
https://www.sharecafe.com.au/2020/10/19/whe...he-money-going/

Chatting to advisers and investors on a daily basis, a question I frequently get asked is: Where is the money going in ETF land?

Key points:
  • Aussie and International equities have dominated
  • Almost all ETF asset classes have seen positive flows so far year to date
  • Strong net inflows to short funds, gold and ethical exposures
Given the volatility and uncertainty we have seen in the markets this year, it was interesting to pull the Year to Date (1 Jan 2020 to 30 Sep 2020) flows from the ASX.

Source: ASX monthly ETP data.


Australian Equities



When considering Australian equities flows, there is one clear observation broad market exposures dominated, with just over $3.5 billion in net flows. Broad market exposures are generally made up of very liquid, large companies that trade on the ASX. There may be several reasons why this asset class has seen the largest flows:
1. Many active managers failed to outperform their benchmarks over the past year
2. Investors are identifying value within Australian equities
3. Broad market Aussie equity

ETFs involve less stock-specific risk than direct holdings/stock-picking An example of an ETF within this space is the BetaShares Australia 200 ETF (ASX: A200), that aims to track the performance of an index (before fees and expenses) comprising 200 of the largest companies by market capitalisation listed on the ASX. A200 is also the cheapest Australian equities exposure in the market, with management costs of 0.07% p.a.

International Equities


Coming in at #2 is international equities. By further breaking down the asset class, we can obtain a better understanding into the exact exposures these flows have gone into.

Firstly, 'quality' as a factor is a real standout from a performance perspective. Given the unprecedented times, it is no wonder quality exposures have seen flows, with around $400 million in inflows into quality ETFs to 30 September. Historically, companies with quality factors have tended to outperform the broader global market during the slowdown and contraction phase of the economic cycle, and typically have demonstrated lower volatility and drawdowns in falling markets and periods of heightened volatility.

Of flows into U.S. equity funds, ETFs providing exposure to the Nasdaq 100 Index took the lion's share, with the BetaShares NASDAQ 100 ETF (ASX: NDQ) and the BetaShares NASDAQ 100 ETF Currency Hedged (HNDQ) attracting ~$380 million in new money between them unsurprising given the strong performance of the global technology sector so far in 2020.

Fixed income
With the prevailing market volatility and uncertainty so far in 2020, it is no surprise to observe strong flows into the defensive side of the market.

For yield hungry investors, we saw hybrids exposure obtain a large share of inflows with over $190 million. Hybrids were accessed via the actively managed BetaShares Active Australian Hybrids Fund (Managed Fund) (ASX: HBRD) that is paying a 12 month gross distribution yield of 3.9% (as at 1 October 2020).

For more defensive investors, we saw strong flows into core Aussie and Global bond indices, with Australian Government bonds a standout.

Short Funds
If any statistic is going to highlight overall market sentiment, this could be the one. For those who may not be aware, BetaShares has a suite of short funds that are designed to provide a negative correlation to the market ; i.e. to increase in value when the sharemarket goes down (and vice versa). At the height of the market turmoil in March and April, we saw more than $200 million in new money flow into short funds on the ASX, as bearish investors sought to profit from a falling market or hedge their current equity exposures.

To put things in perspective, as at 6 October, total funds under management (FUM) in the BetaShares short funds stood at ~$840 million, compared to FUM at 1 January 2020 of $293 million.

Gold
Given recent market volatility, and considering gold has traditionally been viewed as a 'safe-haven' asset, we have previously written about why there are still plenty of reasons to consider an investment in gold. Gold has seen a consistent and high level of total flows this year. Investors can obtain cost effective exposure to gold via the BetaShares Gold Bullion ETF .. Currency Hedged (ASX: QAU).

Ethical Funds
One last asset class to highlight ... Ethical or ESG strategies. This year has seen large and growing inflows into ethical ETFs with over $900 million YTD. Since December 2016, the market cap of ethical ETFs in Australia has grown over 800% (~$1.9 billion).

Since the start of the pandemic, the knock-on effects of lockdown, including restricted movements of people and the shutdown of industrial activity, have had significant impacts on global carbon emissions and the way we work. Now, as we consider how best to shape the economy coming out of the crisis, ESG considerations are again coming to the forefront of investment decisions.

The range of BetaShares ethical ETFs provides true to label ethical exposures to companies or bond issuers that are well-positioned to thrive in a more sustainable and increasingly digital future economy. These funds have also captured a large portion of total ethical asset class flows to date.

Summary
Just because an asset class is receiving large inflows does not necessary mean it will perform well. It is, nonetheless, always interesting to observe where the money is flowing into and out of, to get a sense of sentiment within the overall market, and what is resonating with different types of investors



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Jul 8 2020, 08:05 PM
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Had not heard about this fund; like most Aussie ETF alternatives, the ability to attract inflows becomes all important
QUOTE
VanEck Vectors Wide Moat ETF (ASX: MOAT)

This exchange-traded fund (ETF) is one of my favourite investments. It is not an index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ). Rather, it only invests in a select group of US companies that have characteristics that indicate the presence of a wide moat.

A moat is a concept popularised by Warren Buffett and translates into a durable competitive advantage a company might possess. This moat protects the company from competition and disruption. Apple is a great example of a company with a wide moat. Think about Apples brand power. It enables the company to charge relatively high prices for its products compared with any competitor. Not a bad trait for an investment to have.

At the time of writing, the MOAT ETF has 47 holdings. These include famous names like American Express, Amazon.com, Boeing, Buffetts own Berkshire Hathaway, and Harley Davidson. I am more than happy to own such a basket of famous brands myself.

MOAT has returned an average of 15.69% over the past 5 years. A pretty good showing from an ETF. As such, I think MOAT can merit a place in any ASX portfolio, but especially those lacking in some American exposure
Motley Fool



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Jul 19 2019, 03:50 PM
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Structurally, Passive ETFs and Active ETFs are similar, but they also have some differences that are important for investors to understand.

What are the similarities?

Structure

In Australia, both Passive and Active ETFs are generally registered managed investment schemes, a type of ‘unit trust’, that trades on the ASX in the same way that a share in a company trades on ASX. Like any share or unit traded on the ASX, investors can buy or sell units in the ETF from each other on the ASX.

Liquidity

To ensure there is efficient trading in the secondary market of ETF units and with the objective of having the trading price track the underlying net asset value, ETF issuers put in place additional liquidity arrangements. As ETFs are open-ended funds and can continuously issue and redeem units, they are able to facilitate these liquidity arrangements.

Passive ETFs issuers largely outsource the provision of liquidity to third-party market makers such as investment banks. Market makers trade an inventory of units on ASX and are able to apply or redeem with the ETF to settle their net trading position. These market makers form their own view of the net asset value of the ETF and provide bids and offers in the market around that value, within the bounds of their own balance sheet risk appetite for providing this liquidity.

Active ETF issuers either follow the same market making model as Passive ETFs or opt to have the ETF provide the liquidity. This means that the ETF might, at any time, be providing bids and offers in the market around the issuer’s assessed value of the units at that time.

Transparency

Investors have transparency as to the value of the underlying fund and the composition of its portfolio through regular disclosure provided on the ASX and the ETF issuer’s website. The value of the ETF’s underlying investments is generally provided in the form of the net asset value per unit and an indicative intraday net asset value (iNAV) per unit, which generally updates throughout the ASX trading day. The level of portfolio disclosure will generally depend on whether the ETF is a Passive ETF or an Active ETF and, in the case of the latter, what has been agreed with the ASX. Passive ETFs will either provide an iNAV per unit and/or the full portfolio comprising names and weights of the investments as well as monthly fund fact sheets. Active ETFs will generally provide daily net asset value and iNAV per unit, monthly fund fact sheets and a full portfolio comprising names and weights of the investments on either a monthly or quarterly basis.

Taxation

Being unit trusts, both Passive and Active ETFs allow a full pass-through of income such as dividends, franking credits, capital gains and discounted capital gains income, and provide investors with the ability to manage their own tax affairs.

What are the differences?

Types of Investments

With an Active ETF, a portfolio manager will undertake stock research to determine which underlying securities or stocks to hold and in what percentages. They will then actively manage weightings of the stocks depending on stock valuations, industry trends and views on macroeconomics. They can also hold cash to manage the overall risk of the portfolio and also to take advantage of opportunities when markets move.

A Passive ETF tracks an index. This can be over a broad-based stock market index, a sector index, custom-built indices or indices comprising fixed income, credit, commodities and currency. They can either fully replicate an index by buying all the securities that make up the index or they can be optimised by buying the securities in an index that provides the most representative sample of the index based on correlations, exposure and risk. Physical ETFs attempt to track their target indices by holding all, or a representative sample, of the underlying securities that make up the index whereas Synthetic ETFs rely on derivatives such as swaps to execute their investment strategy instead of physically holding each of the securities in an index.



How many ETFs are available on the ASX?

As at the end of January 2019, there were 185 Active and Passive ETFs available on the ASX with over $41 billion in assets under management

https://www.sharecafe.com.au/2019/06/26/active-exchange-traded-funds-and-passive-exchange-traded-funds-whats-the-difference/




--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Jul 3 2019, 02:45 PM
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QUOTE
Blackrock is poised to delist five ASX-listed exchange traded funds with around $145 million under management at the end of the financial year, in the biggest wind-up of its kind to take place.

The world's largest asset manager says the ETFs have underwhelmed in terms of fund flow, and winding up the funds will remove duplication for investors and allow them to concentrate on its remaining suite of funds.

"We believe some exposures are better served with our remaining range, and this change will allow BlackRock to focus on exposures which are relevant to Australian investors today," a statement from the company said.

The funds to be delisted are
- iShares Russell 2000,
- iShares MSCI Singapore,
- iShares Global Telecom,
- iShares MSCI Hong Kong and
- iShares MSCI BRIC ETF.

It will take place on June 30. Blackrock will remain one of the largest providers of ETFs in Australia, with more than $10 billion across 34 funds.
- this is a very real negative aspect. Too often investors in ETFs are passive, long-term. The issuers can't make money on that!

Always go for liquidity. Size matters




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
Kuri
post Posted: Oct 24 2008, 08:16 PM
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Posts: 31


Seeing as the market has dropped sub 4000 I have decided to look into index linked funds to capture the market as it inevitably heads north. Reading various articles including the AFR these funds don't always track the ASX like they are supposed to. This has made my task harder.

Does anybody have any experience with this type of investing and know of any reputable funds?





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[color="#ff0000"]WARNING: Do not make any financial decisions based on anything in this post.[/color]
 
 



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