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Core portfolio for just 27 and a half basis points

The NZX-owned Smartshares business has rolled out a suite of ETFs which will give investors a core portfolio with management fees of 27 and a half basis points overall.

Wednesday, July 15th 2020, 6:00AM 4 Comments

It has added four new funds to bring the total number of ETFs offered to 35. The four new funds are added to its Core series, which includes four existing funds and the other 27 are in what it calls its Specialist series.

Smartshares Client Director Thom Bentley says the new funds fill some gaps in its existing offering and provide a set of funds investors and advisers can use to easily build a low-cost diversified portfolio.

The new funds are the NZX50 fund, ASX 200 fund, NZ Government Bond fund and Total World Hedged fund. 

The difference between the new S&P/NZX 50 fund and the existing NZ Top 50 fund is that the existing fund  tracks the S&P/NZX 50 Portfolio Index which caps the most it can hold in one stock at 5%. The new fund tracks the most widely used New Zealand shares index and holds stocks at the same proportion as they represent in the index.

Smartshares NZ Government Bond fund is designed to compliment the NZ Bond fund which is benchmarked against the S&P NZX Corporate A Grade Index, while the new Total World Hedged fund compliments the existing unhedged fund.

Bentley says the new funds have low management fees, and the fees in two of the four existing Core funds have also been cut.

An adviser can now build a well diversified portfolio using its Core funds which would have a total management fee of 27 and a half basis points. This fund would have a 60/40 growth income split.

Bentley says it is likely that "we are in an low return environment" for a long time and every basis point in fees which can be saved will help returns.

NZX chief executive, Mark Peterson, said the Smartshares Core Series will add depth and breadth to the choices for local investors on their local market – further driving the growth of ETFs in New Zealand, which has jumped 243% in terms of the total value of trades in the first half of 2020.

The total value of ETF trades on the New Zealand market in the six months to June 30 this year was $1.234 billion, compared with less than $1 billion for the full year 2019.

“ETFs are still in their infancy here in New Zealand – representing only 3.5% of the equities and funds traded on-market – with huge potential for growth when you look at the trajectory in the US where index-tracking funds have overtaken the value of actively-managed stock funds.”

Fees
New Core funds

NZ50 Gross 0.2%
ASX 200 0.3%
NZ Government Bond 0.2%
Total World Hedged 0.46%

Existing Core funds
NZ Cash fund cut from 0.33% to 0.2%
Total World Unhedged cut form 0.56% to 0.4%
US 500 fund remains at 0.34%
Global Aggregate Bond fund remains at 0.3%

 

 

Tags: Smartshares

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Comments from our readers

On 15 July 2020 at 9:29 am Pragmatic said:
So the NZ Cash fund cut its fee from 0.33% to 0.2%. With a 90 day rate gross 90bps, that means I’m net 70bps for the privilege of using this vehicle.
On 15 July 2020 at 9:57 am Felipe Falope said:
The 90 Day rate is the benchmark, not the return. According to Smartshares website the net of fee return on the NZ Cash ETF for the last 12 months is 1.66%
On 17 July 2020 at 1:59 pm Gordon Gecko said:
Are smartshares going to move all their existing clients across to the new reduced fee funds or are they going to keep the investors hostage and make them redeem and reinvest?
On 17 July 2020 at 3:26 pm Smartshares said:
Hi Gordon, as outlined in the article the new funds do not track the same benchmarks as the existing funds.

If investors prefer the full NZX 50 Gross index as opposed to the NZX 50 Portfolio Index, we expect they'll make a decision on that taking into account the transaction costs. Note investors can buy direct through Smartshares and some online platforms with zero brokerage or bid/offer spread.

The Core/Specialist ETF pricing approach is common offshore, with both Vanguard and iShares offering a similar approach. For example the iShares ASX 20 ETF is priced at 0.24% p.a. whereas the iShares Core ASX 200 is priced at 0.09% p.a., while Vanguard charges 0.10% for its core Australian Shares ETF and 0.25% for its Australian Shares High Yield ETF.

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ANZ Term fund - 6 months 1.00    1.02    1.07
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ANZ Term Fund - 9 months 1.00    1.02    1.07
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ANZ Term Fund - 2 years 1.05    1.08    1.12
ANZ Term Fund - 5 years 1.05    1.08    1.12
ASB Bank Term Fund - 90 days 0.40    0.41    0.42
ASB Bank Term Fund - 6 months 0.95    0.97    1.02
ASB Bank Term Fund - 12 months 0.90    0.92    0.96
ASB Bank Term Fund - 18 months 0.90    0.92    0.96
ASB Bank Term Fund - 2 years 0.90    0.92    0.96
ASB Bank Term Fund - 5 years 1.05    1.08    1.12
ASB Bank Term Fund - 9 months 0.90    0.92    0.96
BNZ Term PIE - 120 days 0.65    0.66    0.69
BNZ Term PIE - 150 days 0.60    0.61    0.64
BNZ Term PIE - 5 years 1.00    1.02    1.07
BNZ Term PIE - 2 years 0.90    0.92    0.96
BNZ Term PIE - 18 months 0.90    0.92    0.96
BNZ Term PIE - 12 months 0.90    0.92    0.96
BNZ Term PIE - 9 months 0.90    0.92    0.96
BNZ Term PIE - 6 months 0.95    0.97    1.02
BNZ Term PIE - 90 days 0.40    0.41    0.42
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Kiwibank Term Deposit Fund - 12 months 1.00    1.02    1.07
Kiwibank Term Deposit Fund - 150 days 0.75    0.77    0.80
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Westpac Term PIE Fund - 150 days 0.70    0.71    0.74
Westpac Term PIE Fund - 120 days 0.60    0.61    0.64
Westpac Term PIE Fund - 18 months 1.00    1.02    1.07
Westpac Term PIE Fund - 12 months 1.00    1.02    1.07
Westpac Term PIE Fund - 6 months 1.00    1.02    1.07
Westpac Term PIE Fund - 9 months 1.00    1.02    1.07
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Westpac Term PIE Fund - 2 years 1.05    1.08    1.12
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