Could 2020 be the year to invest in ETFs such as the SPDR S&P/ASX Australian Government Bond Fund ETF (ASX: GOVT) and Platinum Funds Management International Fund (Quoted Managed Hedge Fund) ETF (ASX: PIXX)?
How and why Aussie investors use the GOVT ETF
The GOVT ETF by SPDR invests in Australian Government bonds issued by the Commonwealth/Federal Government, State Governments (Semis) and territories.
As at the end of last month, the GOVT ETF had $25.87 million of money invested. Since its 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. At Best ETFs we say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). 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.
Fees & costs
The yearly management fee on the GOVT ETF is 0.22%. The issuer, SPDR, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the GOVT 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 GOVT Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
Did you know you access our free investment report? View the free GOVT ETF report.
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Getting to know the PIXX ETF
The Platinum PIXX Fund is an actively-managed fund that invests in a select portfolio of international companies. The fund typically selects between 70-140 global equities that the investment team at Platinum believe to be undervalued by the market.
At the end of May 2020, PIXX’s FUM stood at $323.28 million. With PIXX’s FUM over $100 million, we say the ETF has met our minimum criteria for the total amount invested. However, in reality, a very sustainable ETF in the Active ETF (e.g. ETMF) sector should be able to scale well beyond that amount.
Are PIXX’s fees too high?
Platinum Funds Management charge a yearly management fee of 1.1% for the PIXX ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $22.00.
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.
We’ve got a full GOVT ETF review available on our website right now. Click here to access our comprehensive investment report.
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