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‘Game changer’ ETF launches

ETF, Australian ETF

An Australian ETF manager has announced the world’s lowest cost Australian ETF, but there’s more to ETFs than just costs, another investment manager has said.

BetaShares announced on Friday that it would launch an Aussies shares ETF, A200, with a 0.07 per cent per annum management fee.

It will grant investors exposure to 200 of the largest companies on the ASX and will be BetaShares’ 45th fund available on the exchange.

“A200 is a game-changer for the Australian wealth management industry, significantly reducing the cost of investing in a diversified portfolio of Australian shares,” said BetaShares chief executive Alex Vynokur.

“BetaShares is a business that was born and bred in Australia. We remain focused on the development and growth of the local ETF market, helping Australians build robust, diversified and cost-effective investment portfolios.”

However, while Vanguard Investments Australia head of corporate affairs Robin Bowerman welcomed the news of cheaper ETFs, he reminded investors that there’s more to ETFs than management fees.

As he told Nest Egg’s sister publication, Investor Daily: “Cost is perhaps one of the more straightforward ways to compare ETFs. However, there are some cost implications specific to ETFs that need to be considered.

“Investors should consider a number of factors when evaluating index and ETF products, including tracking, pre- and post-tax returns, and benchmark composition.”

Mr Bowerman explained that the cost of buying and selling ETFs goes further than the headline management expense ratio (MER), noting that those who buy ETFs incur bid/ask spread. That’s the difference between the market price to buy the ETF and the selling price.

“The bid/ask spread is highly dependent on the liquidity in the market, the breadth of the underlying index, and on the daily happenings in the marketplace on any given day, hour or minute,” he said.

“There may also be brokerage commissions associated with buying or selling the ETF, as with any stock.

“Tracking error – the difference between the gross return of the index and the ETF net return after fees – is another comparison investors can make when assessing one product over another.”

‘Game changer’ ETF launches
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