Is 2020 going to be the year to invest in ASX ETFs like the BetaShares Legg Mason Emerging Markets Fund (Managed Fund) ETF (ASX: EMMG) and iShares FTSE China Large-Cap ETF (ASX: IZZ)?
How an Aussie (or Kiwi!) investor can use the EMMG ETF
The BetaShares Legg Mason EMMG Fund is a concentrated and actively managed portfolio of emerging global equities. This fund aims to outperform the MSCI Emerging Markets Index, over a 5 year period.
According to our most recent data, the EMMG ETF had $12.95 million of money invested. Given its funds under management (also known as FUM or ‘market cap’) is less than $100 million, you should consider if this ETF is still too small and if it is sustainable for the ETF issuer. 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 general rule, especially if the ETF issuer/provider is reputable and committed to growing the ETF’s FUM through effective marketing strategies and distribution to financial advisers.
Fees to consider
According to our numbers, the annual management fee on the EMMG ETF is 1%. The issuer, BetaShares, collects this fee automatically.
Meaning, if you invested $2,000 in the EMMG ETF for a full year you could expect to pay management fees of around $20.00. 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 0.5%, which is $10.00 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 EMMG Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
You can get a copy of our free investment review when click here to see the EMMG ETF report.
Key facts about the IZZ ETF
The iShares IZZ ETF provides investors with exposure to the 50 largest and most liquid companies in China which are listed on the Hong Kong Stock Exchange.
With our numbers for Oct 2020, IZZ’s FUM stood at $127.3 million. Since the IZZ’s FUM is over $100 million, our investing team would say the ETF has met our minimum criteria for the total amount invested, otherwise known as FUM. A very sustainable ETF in the Index sector should be able to scale well and become profitable for the ETF issuer.
Are the fees for the IZZ ETF bad?
iShares, the ETF issuer, charges a yearly management fee of 0.74% for the IZZ ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $14.80.
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.
Get the full IZZ review available on our website by clicking this link to access our report.
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