The VanEck Vectors Australian Floating Rate ETF (ASX: FLOT) and Vaneck Australian Resources ETF (ASX: MVR) are two ASX ETFs that might be worth digging into in 2020.
VanEck FLOT ETF
The VanEck FLOT ETF gives investors exposure to a portfolio of Australian dollar-denominated floating rate bonds of investment-grade quality.
As at the end of last month, the FLOT ETF had $259.04 million of money invested. Given FLOT’s total funds under management (FUM) figure is over $100 million, the ETF has met our minimum criteria for the total amount of money invested, otherwise known as FUM. We draw the line at $100 million for ETFs in the Fixed interest – Australia sector because we believe that relative to smaller ETFs, achieving this amount of FUM derisks the ETF.
Fees & costs
The yearly management fee on the FLOT ETF is 0.22%. The issuer, VanEck, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the FLOT ETF for a full year you could expect to pay management fees of around $4.40. This fee is different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.) to buy or sell the ETF. Importantly, you should also be mindful of the ‘spread‘ for the ETF.
Is the ETF too expensive?
The easiest way to know if the ETF is too costly is to compare it with other ETFs in the same sector, and against the industry average. The average management fee (MER) across all of the ETFs covered by Best ETFs Australia is 0.5%, which is around $10.00 per $2,000 invested. Small changes in fees can make a big difference after 10 or 20 years. To understand all of the fees, you should read the FLOT Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
To learn more about FLOT, click here to access our free investment report.
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The Vaneck MVR ETF – key points
The VanEck MVR ETF provides focused exposure to the Australian resources sector, which is a significant part of the Australian economy. This is a low-cost way to invest in the Australian resources industry through a single fund.
At the end of May 2020, MVR’s FUM stood at $49.72 million. With less than $100 million invested, it’s important to consider if this ETF is still too small and you should wait to buy in. If you’re worried about the size of the ETF, consider comparing it alongside some of the other Index sector ETFs, using our full list.
Are MVR’s fees too high?
Vaneck charge a yearly management fee of 0.35% for the MVR ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $7.00.
The management fee is above the average for all ETFs on our radar, but keep in mind the ETF may be able to justify it.
If you’re weighing up the FLOT ETF in a diversified portfolio, consider searching our full ETF list to compare fees and costs side-by-side. Another thing you can do is access our comprehensive investment report on FLOT.
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