Find out what the ETF does
The iShares IHEB ETF provides investors with exposure to the performance of global emerging markets bonds that are US dollar-denominated, hedged back into Australian dollars.
Investors could use the IHEB ETF to diverisify an existing portfolio and seek potentially higher levels of income compared to developed market bonds – all the while potentially minimising the impact of Australian dollar volatility on investment returns.
IHEB’s FUM does not meet our minimum hurdle
The iShares IHEB ETF had $41.35 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 iShares, 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.
Pay attention to yearly costs & fees
iShares charges investors a yearly management fee of 0.51% for the IHEB ETF. This means that if you invested $2,000 in IHEB for a full year, you could expect to pay management fees of around $10.20.
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.
Our takeaway
If you’re thinking about investing in IHEB, bear in mind that this is just an introductory glance at the ETF. To explore further, check out our free iShares IHEB report. And for good measure, search our complete list of ASX ETFs for similar ETFs in the Fixed interest – International sector to do a good comparison.
