If you’re considering getting exposure to the Australian shares sector, the InvestSMART Intelligent Investor Ethical Share Fund (Managed Fund) ETF (ASX: INES) might be one ASX ETF to watch in June.
What does the InvestSMART INES actually do?
The Intelligent Investor INES Fund is an actively managed ETF, with a focus on Environmental, Social and Governance (ESG) factors. The fund aims to achieve medium to long-term capital growth.
Below $100m in funds under management
The INES ETF had $18.25 million of money invested when we last pulled the monthly numbers. With a funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small. We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least) because if an ETF is too small it may not be sustainable for an ETF issuer, such as InvestSMART. However, there are exceptions to this rule of thumb, especially if the ETF issuer/provider is committed to growing the ETF’s FUM to the point where it becomes profitable.
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Don’t forget the fees (and other costs)
With a yearly management fee of 0.97% charged by InvestSMART, if you invested $2,000 in the INES ETF for a full year you could expect to pay management fees of around $19.40. For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.54% or around $10.80 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
In addition to a yearly management fee, there are other costs investors must consider, including brokerage and taxes. A specific cost for ETF and mFund investors to consider is the buy-sell spread, which is the slippage or ‘invisible’ cost paid by an investor when he or she buys or sells the ETF. For the INES ETF, the most recent average monthly buy-sell spread we gathered (May 2020) was 0.84%. Remember, the lower (or ‘tighter’) the buy-sell spread, the better. This buy-sell spread was above the average ETF spread of 0.45%, which means the INES ETF has more slippage than the average ETF (that’s a bad thing).
Next steps
Before buying any ETF based on what you read here, feel free to read our free InvestSMART INES report. Then, search our complete list of ASX ETFs to do a proper side-by-side comparison of your chosen sector.
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