The evolution of ETFs
Disclaimer The information contained in this document is general information only and does not constitute personal financial advice. It does not take into account any person’s financial objectives, situation or needs. It has been prepared by BetaShares Capital Limited (ABN 78 139 566 868, Australian Financial Services Licence No. 341181) (“BetaShares”). The information is provided for information purposes only and is not a recommendation to make any investment or adopt any investment strategy. BetaShares assumes no responsibility for reliance on this information. Past performance is not indicative of future performance. Investments in BetaShares Funds are subject to investment risk and investors may not get back the full amount originally invested. Any person wishing to invest in BetaShares Funds should obtain a copy of the relevant PDS from www.betashares.com.au and obtain financial and tax advice in light of their individual circumstances.
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About Me David Bassanese Chief Economist, BetaShares Formerly with: • AFR • Macquarie Bank • OECD • Treasury
Author of “The Australian ETF Guide” Confidential – may not be distributed without the consent of BetaShares Capital
About BetaShares Recap on ETFs – the nuts and bolts Some investment products for SMSFs to consider
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Contents About BetaShares Recap on ETFs – the nuts and bolts Some investment products for SMSFs to consider
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About BetaShares • A “Top-4” leading manager of ETFs • Funds under Management ~$3b • Australia’s broadest product range of exchange traded
products • Designed for Australian investors
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An award winning ETF provider BetaShares has received the following awards:
Money Management/Lonsec Fund Manager of the Year Awards 2016 • Best ETF Provider 2016
ETFI Asia Asset Management Awards 2016 • Best High Dividend ETF in Asia – BetaShares Australian Dividend Harvester Fund (managed fund) (HVST) • Best New ETF in Australia – BetaShares NASDAQ 100 ETF (NDQ)
• Best Currency ETF in Asia – BetaShares U.S. Dollar ETF (USD)
ETF Express Global Awards 2016 • Best Currency ETF Management Firm
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BetaShares Product Range
Australian Equities QOZ QFN QRE
Global Equities NDQ UMAX QUS FUEL FOOD HACK
BNKS HEUR HJPN MNRS DRUG
Equity Income
Managed Risk/ Defensive Equity
HVST YMAX
AUST WRLD
AAA
Cash
Short
Geared
Currency
Commodities
Active
BEAR BBOZ BBUS
GEAR GGUS
USD POU EEU
QAG QAU OOO QCB
GLIN RENT DMKT
Contents About BetaShares Recap on ETFs – the nuts and bolts Some investment products for SMSFs to consider
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Growth of the Global ETP Industry Global ETP Industry AUM(1) (US$b) $3,500
$2,959
$3,000
$2,797 $2,396
$2,500
$1,944
$2,000 $1,500
$1,483
$1,525
2010
2011
$1,156 $1,000
$851
$772
$598 $500
$428
$0 2005
2006
2007
2008
2009
2012
2013
2014
2015
Source: BlackRock 1 Includes all exchange traded products (e.g. exchange-traded funds, exchange-traded commodities and exchange-traded notes)
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Growth of the Australian ETF Industry Australian ETP Market Cap: July 2004
August 2016 (A$m)
$25,000
$20,000
04 – 16YTD CAGR 31%
$15,000
$10,000
$5,000
$0 July 04
#ETPs
7
July 05
July 06
9
8
July 07
5
July 08
19
July 09
30
July 10
37
July 11
57
July 12
82
July 13
81
July 14
92
July 15
139
Aug July 16 16
184
CAGR: Compound Annual Growth Rate Source: ASX, BetaShares
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SMSFs have been early (and heavy) adopters of ETFs
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What is an exchange traded fund (ETF)? • investment fund • passively managed
• exchange traded • open ended
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What is an Exchange Traded Fund (ETF)? • investment fund – diversification & investor protection • passively managed
• exchange traded • open ended
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What is an Exchange Traded Fund (ETF)? • investment fund – diversification & investor protection • passively managed – low cost, transparent
• exchange traded • open ended
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What is an Exchange Traded Fund (ETF)? • investment fund – diversification & investor protection • passively managed – low cost, transparent
• exchange traded – liquidity, buy & sell like a share • open ended
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What is an Exchange Traded Fund (ETF)? • investment fund – diversification & investor protection • passively managed – low cost, transparent
• exchange traded – liquidity, buy & sell like a share • open ended – trades close to NAV, tax-efficient
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What is an exchange traded fund?
ETFs combine the trade-ability and liquidity of shares with the diversification and cost benefits of index funds
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Key ETF benefit: if
As at 30 June 2015.
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Variations
Investment Strategy Track an Index Open-ended Exchange Traded
Nondiscretionary/ Rules Based
Discretionary/ Active
exchange traded exchange traded exchange traded funds (ETFs) managed funds active funds
Exchange traded products “ETPs” Confidential – may not be distributed without the consent of BetaShares Capital
Contents About BetaShares Recap on ETFs – the nuts and bolts Some investment products for SMSFs to consider
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BetaShares Australian Dividend Harvester Fund (managed fund) (HVST)
An Investment Fund Tailor-Made for SMSFs & Retirees Confidential – may not be distributed without the consent of BetaShares Capital
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BetaShares Australian Dividend Harvester Fund (managed fund) (ASX: HVST) The Fund aims to: • provide franked income, paid monthly, at least double that of the market on an annual basis • reduce volatility and cushion downside market risk.
Specifically designed to meet the investment challenges of SMSFs and retirees
*Underlying Exposures and Sector Allocations will change regularly as a result of the investment strategy
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The Dividend Harvester Strategy
ASX 50 UNIVERSE
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The Dividend Harvester Strategy
Stocks paying dividends this period
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The Dividend Harvester Strategy
Dividend paying stocks by highest grossing yield
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The Dividend Harvester Strategy
14 Stock Portfolio
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The risk management overlay defending against market declines S&P/ASX 200 Index (1992-2013): Cumulative equity return and volatility
Selected periods when increased market volatility was associated with market declines
Source: Milliman Financial Risk Management LLC, 31/12/1991-31/12/2013. The chart above is historical and for illustrative purposes only. It does not represent actual performance of any investment. Past performance is no guarantee of future results.
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HVST Performance comparison: HVST v S&P/ASX 50: inception to 29 July 2016
Past performance is not an indicator of future performance. Source: BetaShares, Bloomberg
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HVST has outperformed the S&P/ASX 50 in the past year Performance comparison: HVST v S&P/ASX 50: 1 year to 29 July 2016 HVST
S&P/ASX 50
Difference
Net income
11.6%
4.8%
6.8%
Franking benefit (est)
3.7%
1.7%
2.0%
Gross income
15.4%
6.5%
8.8%
Price return
-6.3%
-6.2%
-0.1%
Net total return
5.3%
-1.4%
6.7%
Gross total return
9.0%
0.3%
8.7%
Past performance is not an indicator of future performance. Source: BetaShares, Bloomberg Confidential – may not be distributed without the consent of BetaShares Capital
HVST Some things to keep in mind Due to the “dividend run up effect” some of the higher income produced by HVST may come at the cost of capital return under performance. But, • • •
some evidence to suggest market inefficiency, i.e. prices don’t fully adjust downward for dividends about to be paid. may mitigated by risk management overlay during periods of market weakness. Further offset to the extent full/partial dividend re-investment used.
Risk management does not protect against • •
Stock specific or “concentration” risk Gap events
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BetaShares Global Sector Series
BetaShares Global Sector Series is currently the most extensive family of global sector products available on ASX Confidential – may not be distributed without the consent of BetaShares Capital
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Agriculture Companies: ASX - FOOD
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Over the next 15 years, the world will have 1.2 billion more mouths to feed Global Population Projections: 1950-2030 billion 9 Projections
8 7
6 5 4 3 2 1 0 1950
1960
1970
1980
Developed Countries
1990
2000
2010
2020
2030
Developing Countries
Source: UN Population Projections, 2016
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Rising living standards will also increase calorie consumption per capita Per-Capita Food Consumption (Beef, Veal & Poultry) by country: 2014
Kg per capita, 2014 90 Israel
80
United States 70
Brazil
60
Australia Uruguay Chile
50 South Africa 40
Mexico
Ukraine 30 20 10
Iran
Vietnam Philippines Pakistan
0 $0
China
New Zealand Malaysia
Canada Saudi Arabia
Russia Korea Japan
Turkey
Thailand Indonesia India $10,000
$20,000
$30,000
$40,000 $50,000 $60,000 GDP per capita, PPP basis 2014
Source: OECD-FAO Database
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Investing through agricultural companies provides useful long-run exposure to the food theme BetaShares Global Agriculture Companies ETF - Currency Hedged’s Underlying Index vs MSCI World & FAO Food Price Index: June 2006 – June 2016 Index = 100 30-June-2006 400 FOOD Index 350 300
MSCI World Index - local currency FAO Food Price Index
250 200 150 100 50 0 Jun-06
Jun-08
Jun-10
Jun-12
Jun-14
Jun-16
Source: Bloomberg. The Index which FOOD aims to track is the Nasdaq Global ex-Australia Global Agriculture Companies Hedged AUD Index. You cannot invest directly in an index. Performance excludes the impact of ETF fees and expenses. Past performance is not an indication of future performance of the Index or the ETF. Confidential – may not be distributed without the consent of BetaShares Capital
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Healthcare: ASX - DRUG
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Healthcare spend has increased significantly Total Health Care Spending (% of GDP), current prices: 1970-2015
% 18 16
USA UK
14
Japan
12
Germany Australia
10 8 6
4 2 0 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
Source: OECD Health Statistics, June 2016
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Strong forecast growth in healthcare spending Total Health Care Spending (% of GDP) by Country Income Level: Projections to 2040
% 12
10
8
6
4
2
0 1995 Global
2013 High Income
Upper-middle
2040(f) Lower-middle
Low
Source: World Bank and Institute for Health Metrics.
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Performance of DRUG index historically strong v. MSCI World Index Equity Total Return Performance: February 2009 – June 2016 Index=100 31/01/07 500 450 400
DRUG Index MSCI-World (local currency)
350
300 250 200 150 100 50 0 Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Source: Bloomberg. The Index which DRUG aims to track is the Nasdaq Global ex-Australia Healthcare Hedged AUD Index. You cannot invest directly in an index. Performance excludes the impact of ETF fees and expenses. Past performance is not an indication of future performance of the Index or the ETF. Confidential – may not be distributed without the consent of BetaShares Capital
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Some things to consider • Market risk: Investment returns will be influenced by the fluctuations of the relevant market as a whole (share market or currency market)
• Sector risk • Concentration risk • Investors should seek professional financial advice before investing • Past performance is not an indication of future performance
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Questions? Keep in touch
BetaShares Client Service 1300 487 577
[email protected] Confidential – may not be distributed without the consent of BetaShares Capital