On the ASX, the iShares Core Composite Bond ETF (ASX: IAF) and BetaShares Global Quality Leaders ETF (ASX: QLTY) are two ASX ETFs that could be worthy of closer inspection.
1. iShares IAF ETF (ASX:IAF) – what you need to know
The iShares IAF ETF provides Australian investors with exposure to a portfolio of Australian investment-grade fixed income securities, which includes treasury bonds, corporate bonds and cash.
As at the end of last month, the IAF ETF had $1228.02 million of money invested. Given IAF’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 IAF ETF is 0.15%. The issuer, iShares, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the IAF ETF for a full year you could expect to pay management fees of around $3.00. 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 IAF Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
If you like the sound of the IAF ETF, view our free investment report.
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2. The basics of the BetaShares QLTY ETF (ASX:QLTY)
The BetaShares QLTY ETF provides investors with exposure to a diversified portfolio of 150 leading global companies. These companies are ranked and selected by examining companies based on the following factors; high return of equity and profitability, low leverage and earnings stability.
At the end of May 2020, QLTY’s FUM stood at $43.2 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 Quality factor sector ETFs, using our full list.
Are QLTY’s fees too high?
BetaShares charge a yearly management fee of 0.35% for the QLTY 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.
To get our full IAF ETF review, click here now.
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