If you’re on the hunt for exposure to the Fixed interest – Australia sector, it could be worth adding the SPDR S&P/ASX Australian Government Bond Fund ETF (ASX: GOVT) to your ASX watchlist. Let’s take a closer look at this SPDR ETF.
What is the GOVT ETF used for?
The GOVT ETF by SPDR invests in Australian Government bonds issued by the Commonwealth/Federal Government, State Governments (Semis) and territories.
If there is a dividend/distribution to be paid by the ETF throughout the year, it’s likely to be on a quarterly basis.
Keep an eye on FUM
The SPDR GOVT ETF had $29.1 million of money invested when we last pulled the monthly numbers. With a 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.
We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). This is because if an ETF is too small, it may not be sustainable for an ETF issuer/provider, such as SPDR, to continue to operate it.
That said, there are exceptions to this rule of thumb, especially if the ETF issuer is committed to growing the ETF’s FUM to the point where it becomes profitable.
Fees and costs for investors
SPDR charges investors a yearly management fee of 0.22% for the GOVT ETF. This means that if you invested $2,000 in GOVT for a full year, you could expect to pay management fees of around $4.40.
For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.51% or around $10.20 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
Summary
These are just some of the considerations or factors you would need to look at when weighing up the GOVT ETF. Before doing anything, take a look at our SPDR GOVT report – it’s free. While you’re at it, don’t forget to search our complete list of ASX ETFs.
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