etf australia - the evolution of etfs · •best etf provider 2016 etfi asia asset management...

The evolution of ETFs

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.

Disclaimer

Confidential – may not be distributed without the consent of BetaShares Capital

About Me

David Bassanese

Chief Economist, BetaShares

Formerly with:

• AFR

• Macquarie Bank

• OECD

• Treasury

Author of “The Australian ETF Guide”


4

About BetaShares

Recap on ETFs – the nuts and bolts

Some investment products for SMSFs to consider


5

Contents

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

About BetaShares


7

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


Australian Equities Global Equities Equity Income Managed Risk/

Defensive Equity Cash

QOZ

QFN

QRE

NDQ

UMAX

QUS

FUEL

FOOD

HACK

BNKS

HEUR

HJPN

MNRS

DRUG

HVST

YMAX

AUST

WRLD

AAA

Short Geared Currency Commodities Active

BEAR

BBOZ

BBUS

GEAR GGUS

USD POU EEU

QAG QAU OOO QCB

GLIN RENT DMKT

BetaShares Product Range

9

Contents

About BetaShares




Growth of the Global ETP Industry

10

$428 $598

$851 $772

$1,156

$1,483 $1,525

$1,944

$2,396

$2,797 $2,959

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Global ETP Industry AUM(1) (US$b)

Source: BlackRock 1 Includes all exchange traded products (e.g. exchange-traded funds, exchange-traded commodities and exchange-traded notes)


$0

$5,000

$10,000

$15,000

$20,000

$25,000

July 04 July 05 July 06 July 07 July 08 July 09 July 10 July 11 July 12 July 13 July 14 July 15 July 16

Confidential – may not be distributed without the consent of BetaShares Capital 11

Growth of the Australian ETF Industry

Australian ETP Market Cap: July 2004 August 2016 (A$m)

04 – 16YTD

CAGR 31%

#ETPs 7 9 8 5 19 30 37 57 82 81 184 92 139

CAGR: Compound Annual Growth Rate

Source: ASX, BetaShares

Aug 16


SMSFs have been early (and heavy) adopters of ETFs

• investment fund

• passively managed

• exchange traded

• open ended

What is an exchange traded fund (ETF)?


• investment fund – diversification & investor protection

• passively managed

• exchange traded

• open ended

What is an Exchange Traded Fund (ETF)?



• passively managed – low cost, transparent

• exchange traded

• open ended





• exchange traded – liquidity, buy & sell like a share

• open ended





• exchange traded – liquidity, buy & sell like a share

• open ended – trades close to NAV, tax-efficient



18

What is an exchange traded fund?

ETFs combine the trade-ability and liquidity of

shares with the diversification and cost benefits

of index funds


19

Key ETF benefit: if

As at 30 June 2015.


Variations

Track an Index

Non-

discretionary/

Rules Based

Discretionary/

Active

Open-ended

Exchange

Traded

exchange traded

funds (ETFs)

exchange traded

managed funds

exchange traded

active funds

Exchange traded

products

“ETPs”

Investment Strategy



Contents

About BetaShares



22

BetaShares Australian Dividend Harvester Fund (managed fund) (HVST)

An Investment Fund Tailor-Made for SMSFs & Retirees


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.

BetaShares Australian Dividend Harvester Fund (managed fund) (ASX: HVST)

*Underlying Exposures and Sector Allocations will change regularly as a result of the investment strategy

Specifically designed to meet the

investment challenges of SMSFs and

retirees


24

The Dividend Harvester Strategy

ASX 50

UNIVERSE


25


Stocks paying

dividends this

period


26


Dividend

paying stocks

by highest

grossing yield


27


14 Stock

Portfolio


28

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.


HVST

Past performance is not an indicator of future performance. Source: BetaShares, Bloomberg

Performance comparison: HVST v S&P/ASX 50: inception to 29 July 2016


HVST has outperformed the S&P/ASX 50 in the past year

Past performance is not an indicator of future performance. Source: BetaShares, Bloomberg

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%


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


HVST Some things to keep in mind

32

BetaShares Global Sector Series

BetaShares Global Sector Series is currently the most extensive

family of global sector products available on ASX


33

Agriculture Companies: ASX - FOOD


34

Over the next 15 years, the world will have 1.2 billion more mouths to feed

Global Population Projections: 1950-2030

Source: UN Population Projections, 2016

0

1

2

3

4

5

6

7

8

9

1950 1960 1970 1980 1990 2000 2010 2020 2030

Developed Countries Developing Countries

billion

Projections



Rising living standards will also increase calorie consumption per capita

Per-Capita Food Consumption (Beef, Veal & Poultry) by country: 2014

Source: OECD-FAO Database

Australia

Canada

Chile

Israel

Japan

Korea

Mexico

New Zealand

Turkey

United States

RussiaUkraine

South Africa

Brazil

Uruguay

China

India Indonesia

Iran

Malaysia

Pakistan

Philippines

Saudi Arabia

Thailand

Vietnam

0

10

20

30

40

50

60

70

80

90

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

Kg per capita, 2014

GDP per capita, PPP basis 2014


Investing through agricultural companies provides useful long-run exposure to the food theme

0

50

100

150

200

250

300

350

400

Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16

FOOD Index

MSCI World Index - local currency

FAO Food Price Index

Index = 100 30-June-2006

BetaShares Global Agriculture Companies ETF - Currency Hedged’s Underlying Index vs MSCI World & FAO Food

Price Index: June 2006 – June 2016

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.


Healthcare: ASX - DRUG

38

Healthcare spend has increased significantly

Total Health Care Spending (% of GDP), current prices: 1970-2015

Source: OECD Health Statistics, June 2016

0

2

4

6

8

10

12

14

16

18

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

USA

UK

Japan

Germany

Australia

%


39

Strong forecast growth in healthcare spending

Total Health Care Spending (% of GDP) by Country Income Level: Projections to 2040

Source: World Bank and Institute for Health Metrics.

0

2

4

6

8

10

12

1995 2013 2040(f)

Global High Income Upper-middle Lower-middle Low

%


40

Performance of DRUG index historically strong v. MSCI World Index

Equity Total Return Performance: February 2009 – June 2016

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.

0

50

100

150

200

250

300

350

400

450

500

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

DRUG Index

MSCI-World (local currency)

Index=100 31/01/07


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


Questions?

Keep in touch

BetaShares Client Service

1300 487 577

[email protected]


mailto:[email protected]

etf australia - the evolution of etfs · •best etf provider 2016 etfi asia asset management...

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