On the ASX, the iShares Enhanced Cash ETF (ASX: ISEC) and VanEck Vectors Australian Subordinated Debt ETF (ASX: SUBD) might be worth digging into in 2020.
What to know about the iShares ISEC ETF
The iShares ISEC ETF provides investors with exposure to higher-yielding, short-term money market instruments, including floating rate notes. ISEC seeks to outperform the S&P/ASX Bank Bill Index (before fees and expenses).
According to our most recent data, the ISEC ETF had $197.44 million of money invested. With ISEC’s total funds under management (FUM) figure over $100 million, the ETF meets our team’s minimum investment criteria for FUM levels. As a general rule, our team draws the line at $100 million for ETFs in the Cash – Australian sector because we believe that, relative to smaller ETFs, achieving this amount of FUM lowers the chance that the ETF issuer will close the ETF.
Fees to consider
According to our numbers, the annual management fee on the ISEC ETF is 0.12%. The issuer, iShares, collects this fee automatically.
Meaning, if you invested $2,000 in the ISEC ETF for a full year you could expect to pay management fees of around $2.40. This fee is different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.), which is the fee to buy or sell the ETF. In addition to a management fee charged by the issuer, be mindful to check the ‘spread‘ for the ETF.
A fee comparison
Fees aren’t the only key consideration for ETF investors, but it’s an easy thing to do. To understand if the ETF you’re looking at is too costly, compare it with other ETFs from the same sector, and against the industry average. For example, the average management fee (MER) across all of the ETFs covered by the Best ETFs Australia team was 0.51%, which is $10.20 per $2,000 invested. Keep in mind that small changes in the fees paid can make a big difference after 10 or 20 years. You should read the ISEC Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
Keep learning about the ISEC ETF. Click here to access our free ETF review.
The VanEck SUBD ETF – key points
The VanEck SUBD ETF invests in a portfolio of Australian dollar-denominated subordinated bonds from a range of banks and insurance companies.
With our numbers for July 2020, SUBD’s FUM stood at $78.3 million. Given it has less than $100 million invested, ask yourself (or your adviser) if the ETF is still too small (and if you should wait to buy into it). If you’re concerned the ETF might not be established enough, compare it alongside one of the other Index sector ETFs, using our full list of ETFs.
Are the fees for the SUBD ETF bad?
VanEck, the ETF issuer, charges a yearly management fee of 0.29% for the SUBD ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $5.80.
The management fee is above the average for all ETFs on our list of ASX ETFs, but keep in mind the ETF may be able to justify the higher price tag with superior performance over time.
Before rushing out and investing in the ISEC fund, consider searching our full ETF list to compare the fees and costs of another ETF side-by-side. Another idea might be using our website to get a free but comprehensive investment review on ISEC.
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