E for Exotic & E for ETFs - Are there are any good funds to look at?

  • Nov 24, 2019 AEDT
  • Team Kalkine
E for Exotic & E for ETFs - Are there are any good funds to look at?

In the past decades, Exchange Traded Funds or ETFs have emerged as a compelling investment vehicle in pursuing passively driven investment strategies. Simultaneously, the investment arena of ETFs has also grown up significantly.

ETFs provides an investor with highly liquid investment, just like stocks that could be actively traded on a stock exchange. As a result, ETFs usually trade at a discount or at a premium to its Net Asset Value (NAV) or Net Tangible Asset (NTA).

ETFs investing provides a plethora of investment vehicle such as sector ETFs, leveraged ETFs, dividend ETFs, cash ETFs, bond ETFs, gold ETFs, currency ETFs etc.

Some major benefits of ETFs are below:

Diversification – ETFs could be used as investment to reduce exposure from high volatility in the portfolio. Presently, the investment management companies have flooded the markets with numerous ETFs, and there is hardly any asset class that does not have an ETF linked to it such as commodity ETFs, real estate ETFs etc.

Lower Cost – ETFs are generally cheaper than the conventional investment fund offerings like open-ended mutual funds. ETFs could pass on some of the costs incurred in operating the fund to brokerage houses that hold ETFs in customer accounts. Besides, there could be other reasons behind a lower cost depending upon the investment manager of the ETF.

Let’s look at four such funds trading on ASX:

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

The fund seeks to track the performance of Morningstar® Wide Moat Focus IndexSM, before fees and expenses. According to the index operator, the benchmark of the fund is designed to track the performance of attractively priced investible companies having sustainable competitive advantages.

Its investment manager – VanEck Vectors Associates was founded in 1955, and it continuously thrives on challenging the status quo, having started gold investing in 1968, emerging markets in 1993, and Exchange Traded Funds in 2006.

Highlights of the fund:

  • Focus on US companies having sustainable competitive advantages.
  • Targets companies available at attractive prices relative to index operator’s fair value.
  • Distributes income on an annual basis.
  • Next distribution date of the fund is 20 December 2019.

As of 31 October 2019, the fund’s allocation to the large-cap companies with over USD 5 billion in market capitalisation was 93.1 per cent, and mid-cap companies with a market capitalisation of over USD 1 billion was 6.8 per cent.

Performance as of 12/31/2018 (Source: VanEck Website)

In terms of sectoral allocation, the fund was 23.1 per cent invested in Health Care, 18.2 per cent in Information Technology, 12.5 per cent in Financial, 11.2 per cent in Industrial, 11 per cent in Consumer Discretionary, followed by Consumer Staples, Communication Services etc.

On 22 November 2019, MOAT last traded at $79.3, up by 0.47 per cent relative to the previous close. On a YTD basis, MOAT has delivered a price return of 35.41 per cent.

Pengana Private Equity Trust (ASX: PE1)

Tradeable on ASX like any stock, Pengana Private Equity Trust provides an investor with an opportunity to take apart in the growth from global private market investments. The fund is managed by one of the largest and most diversified independent asset managers – Grosvenor Capital Management, L.P.

October Performance

Since its inception seven months back, the private market investment portfolio has delivered positive returns.

In October, the private market investment return of 0.3 per cent was offset by rising AUD versus USD currency movement, dragging return down by 2 per cent. The overall return of the Trust was down 1.6 per cent.

As of October, the fund had a composition of 77 per cent in short duration credit, 9 per cent in Opportunistic investments, 1 per cent in PE primaries, 9 per cent in cash, and 4 per cent in alignment shares.

October Performance (Source: PE1 ASX Release)

It is Pengana’ intention to pay $0.025 per unit in distributions for each six months from the period of listing to June 2021. And, the first distribution is payable after the period ending 31 December 2019.

After June 2021, the trust expects to target a distribution yield equal to 4 per cent of NAV, excluding the total value of alignment shares. However, the target distribution is not guaranteed, and it is subject to various risks.

On 22 November 2019, PE1 last traded at $1.5, no change relative to the previous close. Since its inception, the price return of PE1 is 20.97 per cent.

SPDR® MSCI Australia Select High Dividend Yield Fund (ASX: SY1)

The fund is managed by States Street Global Advisor Australia, falling under the cohort of SPDR® family. The fund is benchmarked to MSCI Australia Select High Dividend Yield Index before fees and expenses.

Key features:

  • Companies with relatively high dividend yield with potential franking credits are looked forward for earning potential quarterly income.
  • Opportunity to diversify the portfolio with Australian companies in a single trade.
  • Prospect of capturing growth over a long period of time.

As of 21 November 2019, the largest weightings in the funds were, National Australia Bank Limited (ASX: NAB) with 10.19 per cent, Commonwealth Bank of Australia (ASX: CBA) with 9.99 per cent, Westpac Banking Corporation (ASX: WBC) with 9.08 per cent, Australia and New Zealand Banking Group Limited (ASX: ANZ) with 8.56 per cent.

Followed by Wesfarmers Limited (ASX: WES), Macquarie Group Limited (ASX: MQG), Rio Tinto Limited (ASX: RIO), Sydney Airport (ASX: SYD), Insurance Australian Group Limited (ASX: IAG), and Suncorp Group Limited (ASX: SUN).

Distribution History (Source: SPDR Website)

On 22 November 2019, SY1 last traded at $29.35, up by 0.38 per cent relative to the previous close. On a YTD basis, SY1 has delivered a price return of 15.25 per cent.

iShares Edge MSCI Australia Minimum Volatility ETF (ASX: MVOL)

Managed by BlackRock Investment Management Australia Limited, MVOL seeks to closely track the performance of Edge MSCI Australia Minimum Volatility (AUD) Index before fees and expenses.

Feature of the fund:

  • Provides an exposure to diversified Australian equities with potentially less risk.
  • Utilises minimum volatility strategies aimed to lose less amid a broader market downturn.
  • Intends to remain invested across dynamic market conditions.
  • Pays distribution on a semi-annual basis.

As of 21 November 2019, the fund had a P/E ratio of 18.32x with a P/B ratio of 2.15x, and a trailing twelve-month yield of 4.83 per cent. Some of the largest weighting of the fund includes National Australia Bank Limited (ASX: NAB), Commonwealth Bank of Australia (ASX: CBA), Woolworths Group Limited (ASX: WOW), Wesfarmers Limited (ASX: WES), ASX Limited (ASX: ASX), Transurban Group (ASX: TCL) etc.

Distribution History (Source: BlackRock Website)

Concurrently, the fund’s allocation to Financial sector was 27.45 per cent, Real Estate was 13.18 per cent, Materials held 12.46 per cent, followed by Industrials, Consumer Discretionary, Consumer Staples, Health Care, Utilities, Energy, and Communication.

On 22 November 2019, MVOL last traded at $29.89, up by 0.33 per cent relative to the previous close. On a YTD basis, MVOL has delivered a price return of 19.93 per cent.


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