5 Things You Need to Know About ETFs | BetaShares

5 Things You Need to Know About ETFs

BY Justin Arzadon | 22 September 2015
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With a lot of investment information already being brought to you on a regular basis by my colleagues through the BetaShares blog, including relatively heavy posts entitled “Investing in Times of Market Panic”, “Risk Markets Continuing to Sink” and “Investment Outlook Still Being Weak”, I thought I’d keep my piece light hearted and fun to read this time around.

 

ETFs are still a relatively new investment option in the Australian market with approximately $19B of Assets under Management (AUM). Globally the value of the industry is closer to US$3 trillion dollars!  Investment in ETFs globally continue to grow at a dizzying pace and have recently taken over hedge funds in terms of AUM.  Here are 5 interesting facts about ETFs that I think you need to know:

  1. As a born Canadian, it always gives me great pride to see that the first ETF was born in Canada (cue the national anthem… “Oh Canada…”). This product was launched in 1989 and was known as Toronto Index Participation Units (TIP 35) which traded on the Toronto Exchange. TIP 35 allowed investors to participate in the performance of the TSE 35 Composite Index in just one trade.  The product was shortly followed by HIPs, which tracked the Toronto 100 index.
  2. An ETF can be created over almost any liquid asset that is capable of being priced intraday – equities, currencies, commodities and bonds are all potential assets for ETFs. In fact the first ETF tracking the price of Bitcoin was just launched!
  3. While investment in ETFs have grown significantly, relative to managed funds, they still comprise only a small piece of the investment pie. Managed funds currently hold over $30 trillion in assets globally as at 2013, according to ICI. ETFs have more room to grow…
  4. Currently, there are more than 1450 ETFs offered globally by dozens of fund managers with the oldest ETF being the SPDR S&P 500, which is over 20 years old and currently has over US$90 billion of AUM making it the largest ETF in the world. On average, 5000 shares of SPY trade hands each second.
  5. In the U.S. there is such an appetite for diversity that there are individual ETFs listed on U.S. exchanges providing exposure to each of the 30 largest economies worldwide, including exposure to countries such as Iran, Saudi Arabia, Argentina and Pakistan.

Happy Trading!

3 Comments

  1. Dear Justin

    One of the reasons I have 100% of my SMSF pension funds invested in managed funds – all overseas very largely through Platinum, and some with PM Capital and Magellan, is the ease of doing comparisons on performance. This comes to 13 international funds I download daily. I was with MLC Pension for many years, (since Feb 2004) but thankfully have moved to much cheaper and more freedom in our SMSF. I developed from 2004, and still maintain a daily download of the 37 MLC funds to give me an idea of how different sectors in Australia are performing. The 50 funds are then transferred into about 40 spreadsheets in 2 workbooks with time bases of 2 weeks to 2 years, and some beyond. I then use different colours to identify the top 4 funds of the day and the bottom 2 for both MLC and my 13 international funds. From their I identify patterns and can make hopefully intelligent investment decisions. Until I can easily access unit prices for each of your ETF funds to give me historical information, ideally going back to 30 June 2011 – but that is a lot of work! – I find it difficult to compare ETFs and thus give me an idea which ones might be an attractive investment. Cheers, Bill

    1. BetaShares  |  September 28, 2015

      Hi Bill,
      We would be more than happy to provide historical unit prices for any/all of our funds since inception. That said, many of them were not launched on 30 June 2011.

      If you would like to send a request with the exact funds you would like information on to info@betashares.com.au we will happily provide such information to you

  2. Could you pls do a column on the difference between the NTA of an LIC and the NAV of an EFT..

    Also could you explain the shorting process – i.e. do you short the dividends as well as the underlying shares?

    Thanks

    Fiona

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