Product Review BetaShares Global Gold Miners ETF Currency Hedged

Transcription

1 Product Review BetaShares Global Gold Miners ETF Currency P 1-6 ANALYST: BENJAMIN O SHEA APPROVED BY: SIMON BAIRD ISSUE DATE Key information FUND MANAGER ASSET CLASS SECTOR SUB SECTOR INVESTMENT TYPE BETASHARES CAPITAL LTD GLOBAL EQUITIES GLOBAL LARGE CAP SECTOR - PASSIVE EXCHANGE TRADED FUND (ETF) LISTED ON THE AUSTRALIAN SECURITIES EXCHANGE PDS OBJECTIVE TO PROVIDE AN INVESTMENT RETURN THAT AIMS TO TRACK THE PERFORMANCE OF THE NASDAQ GLOBAL EX- AUSTRALIA GOLD MINERS HEDGED AUD INDEX, BEFORE TAKING INTO ACCOUNT FEES AND EXPENSES. INDEX PROVIDER UNDERLYING INDEX NASDAQ NASDAQ GLOBAL EX-AUSTRALIA GOLD MINERS HEDGED AUD INDEX DERIVATIVE USE ALLOWED IN LIMITED CIRCUMSTANCES BUT CANNOT BE USED TO LEVERAGE THE FUND SECURITIES LENDING THE FUND DOES NOT USE SECURITIES LENDING ASX LISTING DATE JULY 2016 DISTRIBUTION FREQUENCY FUND SIZE Fees MANAGEMENT COSTS EXPENSE RECOVERY FEES Daily trading information TICKER SEMI-ANNUAL $4.82M 0.47% P.A. CAPPED AT 0.10% P.A. MNRS 52 WEEK LOW $ WEEK HIGH $4.31 LAST PRICE $3.46 LAST NET ASSET VALUE (NAV) $3.53 PREMIUM / DISCOUNT TO NAV (DAILY) % AVERAGE DAILY TRADED VOLUME 6,592 AVERAGE DAILY TRADED VALUE $25,628 Top 10 holdings NEWMONT MINING CORP 8.74% GOLDCORP INC 7.89% FRANCO-NEVADA CORP 7.27% BARRICK GOLD CORP 7.05% AGNICO EAGLE MINES LTD 6.43% SILVER WHEATON COR 3.85% RANDGOLD RESOURCES LTD 3.71% KINROSS GOLD CORP 3.48% ROYAL GOLD INC 3.12% ANGLOGOLD ASHANTI LTD 2.46% What this Rating means The Investment Grade Index rating indicates that Lonsec has conviction the financial product can generate risk adjusted returns in line with relevant objectives. However, if applicable, Lonsec believes the financial product has fewer competitive advantages than its peers. Strengths The Fund represents an efficient means for investors to express a positive global sector view on gold mining. The Australian domiciled Fund offers greater administration simplicity and tax certainty than cross-listed ETFs. Weaknesses The cost of the Fund is broadly in line with other global sector funds. However, Lonsec notes these types of funds typically have higher costs than funds providing an exposure to broad-based global market capitalisation weighted indexes. Being a sector specific portfolio, the Fund has reasonably high concentration risk. Fund Risk Characteristics BUSINESS SUSTAINABILITY RISK CAPITAL VOLATILITY SECURITY CONCENTRATION RISK SECURITY LIQUIDITY RISK LOW MODERATE HIGH Risk categories are based on Lonsec s qualitative opinion of the risks inherent in the financial product s asset class and the risks relative to other financial products in the relevant Lonsec sector universe. BIOmetrics Aggregated risks STD RISK MEASURE A Standard Risk Measure score of 7 equates to a Risk Label of Very High and an estimated number of negative annual returns over any 20 year period of 6 or greater. This is a measure of expected frequency (not magnitude) of capital losses, calculated in accordance with ASFA/FSC guidelines. Features and benefits COMPLEXITY ESG AWARENESS LOW MODERATE HIGH We strongly recommend that potential investors read the product disclosure statement or investment statement. Lonsec Research Pty Ltd ABN AFSL. No This information must be read in conjunction with the warning, disclaimer and disclosure at the end of this document. This report supersedes all prior reports.

2 P 2-6 ANALYST: BENJAMIN O SHEA APPROVED BY: SIMON BAIRD ISSUE DATE Fee profile FEES VS. UNIVERSE FEES VS. ASSET CLASS FEES VS. SUB-SECTOR LOW MODERATE HIGH Fee BIOmetrics are a function of expected total fee as a percentage of expected total return. What is this Fund? BetaShares, ( The Manager ) adopts a passive investment strategy in managing the BetaShares Global Gold Miners ETF Currency ('MNRS' or 'the Fund'). The Fund is designed to track the performance of the NASDAQ Global ex-australia Gold Miners AUD Index (the 'Underlying Index') before fees and expenses. The Underlying Index is a market capitalisation weighted, sector-specific, ex-australia, global equity (developed and emerging markets) index using a methodology developed by NASDAQ Indices ('the Index Provider'). The Fund is currency hedged, which reduces but not eliminates, the risks associated with movements between the AUD and the currencies in which the Underlying Index constituents are denominated. The Fund's portfolio as at January 2018 comprised 53 securities. Approximately 55.0% of the portfolio is in the top 10 holdings. Regional exposure is weighted to Canada (61.1%) and the United States (14.1%). Using this Fund This is General Advice only and should be read in conjunction with the Disclaimer, Disclosure and Warning on the final page. The Fund is a long only large-cap, sector specific, global equity product and as such will generally sit within the growth component of a balanced portfolio. Lonsec considers the Fund suitable for blending with other global equity strategies for moderate to highrisk profile investors with a 5+ year investment time horizon. Suggested Lonsec risk profile suitability SECURE DEFENSIVE CONSERVATIVE BALANCED GROWTH HIGH GROWTH For guidance on appropriate asset allocations and risk profiles, refer to the latest Lonsec Strategic Asset Allocation Review and Risk Profile Definitions on our website. Lonsec Opinion of this Fund People and resources Established in 2009, BetaShares is a specialist provider of ETFs with approximately $5.3 billion in funds under management (FUM) across 44 exchange traded products as at February BetaShares employs four portfolio managers (all located in Sydney, Australia) in addition to 37 other sales and other staff. Lonsec believes BetaShares' resourcing is sufficient for the current number and type of products managed. Given the Fund s returns are driven by a mostly rules-based investment process, the active management decision that often rests with an individual portfolio manager is significantly reduced. As such, key person risk for the Fund is lower compared to that of an actively managed fund. Overall Lonsec has maintained the Fund's rating of Investment Grade Index. The Fund provides an effective means of gaining a targeted exposure to large-cap gold mining (ex-australia) listed companies. The rating is limited by the fee structure, concentration risk, and the developing performance track record of the Fund. People and Resources BetaShares Holdings was established in 2009 as a specialist provider of exchange traded products. It is 51% owned by Mirae, 46.5% owned by BetaShares management team and the remainder owned by private investors. Mirae is a Korean based asset management entity with over $120bn of FUM. Mirae is particularly active in emerging market equities and is currently expanding its ETF platform globally. The Mirae family of ETFs has US$30bn-plus in assets in ETFs listed across six countries. BetaShares has over $5.3bn of FUM across 44 ETF products as at February Size and experience NAME LOUIS CROUS POSITION SENIOR PORTFOLIO MANAGER & CIO EXPERIENCE INDUSTRY / FIRM 17 / 7 THONG NGUYEN PORTFOLIO MANAGER 13 / 6 DON HOANG CHAMATH DE SILVA ASSISTANT PORTFOLIO MANAGER ASSISTANT PORTFOLIO MANAGER 7 / 3 8 / 1 The BetaShares business currently employs 41 dedicated financial service professionals. More broadly, BetaShares benefits from access to the broader distribution, research, infrastructure and risk management systems and resources of its strategic partners, Mirae. Investment Approach Overview As an index-based ETF provider, BetaShares does not employ analysts and portfolio managers to actively seek stocks expected to outperform a particular benchmark. The approach can be described as full replication, whereby the Fund will generally invest in all securities in the Underlying Index in the same weights as they are held in the Index. The process is designed on maintaining and enhancing index tracking efficiency. The currency hedging aspect of the portfolio is managed by rolling one-month forward contracts of the Australian Dollar against select foreign currencies (CAD, GBP, HKD, USD, ZAR used at the time of Lonsec's review).

3 P 3-6 ANALYST: BENJAMIN O SHEA APPROVED BY: SIMON BAIRD ISSUE DATE Underlying index The Underlying Index is constructed by NASDAQ OMX Group, Inc. The Underlying Index s selection methodology requires constituents to meet certain criteria before they are included in the index, these criteria include: Be a member of the Nasdaq Global Large Cap Index (NQGLCI); Have a country classification from the eligible country list; Have a sector classification of Gold Mining or Platinum & Precious Metals ICB 1777 & The sector classifications are determined by an independent third party, Industry Classification Benchmark (ICB), which is a subsidiary of FTSE international Limited. Securities are ranked in descending order based on their market capitalisation as of the last trading day in May of each year. The top 60 securities by market capitalisation are selected with a maximum weight of any one constituent at 8% and no more than five securities at the cap. If the eligible universe has less than 60 securities no maximum constituent weight is applied. The Underlying Index s constituents are evaluated semi-annually in March and September and rebalanced each quarter. The Underlying Index also has provisions within the methodology to minimise turnover. Transparency BetaShares website is both comprehensive and user-friendly. It is designed as a self-service website with information relating to performance and current holdings for all BetaShares ETFs. Liquidity The Fund did not trade on the ASX on 44 out of the previous 250 days to November 2017 and at present, has $5.4m in Funds under Management (FUM). These metrics are at the lower end of the peer group. Lonsec generally prefers to see higher levels of trading on the ASX as it provides investors with a secondary layer of liquidity. However, the Manager has employed reputable market makers and authorised participants that will act to ensure investors can buy and sell units of the Fund at a reasonably accurate price (i.e. consistent with the net asset value of the underlying securities) in most normal market conditions. The Fund's underlying holdings represent large-cap securities listed on developed and emerging equity markets. Investors should be aware that during normal market conditions, liquidity for these securities will not be a concern; however in times of market stress, some securities may experience more challenging liquidity conditions, particularly in some of the companies listed on emerging markets. Fees and Indirect Costs The Fund s Management Costs of 0.57% p.a. (Management Fee of 0.47% p.a. and Expense Recovery Fee capped to 0.10% p.a.) to be marginally higher than the peer group average for a passive exposure to a sector-specific portfolio of large cap global equities. However, most of these funds do not employ a currency hedging mechanism. The one-year average Bid / Ask Spread to November 2017 of the Fund was high compared in the peer group at 0.60% p.a. Fee comparison FUND NAME BETASHARES GLOBAL GOLD MINERS ETF CURRENCY HEDGED (MNRS) MER (% P.A.) BID/ASK SPREAD (%)* VANECK VECTORS GOLD MINERS ETF (GDX) ISHARES S&P GLOBAL CONSUMER STAPLES (IXI) ISHARES S&P GLOBAL HEALTHCARE (IXJ) *Average one-year Bid / Ask Spread to 30 November 2017 (Source: ASX). Performance The Fund s total return diverged 0.03% from that of its Underlying Index minus fee returns objective over the one year period to 28 February This deviation is considered to be excellent given the meaningful emerging markets exposure of the Fund. Risks An investment in the Fund carries a number of standard investment risks associated with domestic and international investment markets. These include economic, political, legal, tax and regulatory risks. These and other risks are outlined in the Fund Prospectus and should be read in full and understood by investors. Lonsec considers the major risks to be: Equity market risk Investments in equity markets are subject to numerous factors which may have an impact on the performance of an investment (both positive and negative). Unexpected changes in economic, technological, structural, regulatory or political conditions can have an impact on the returns of all investments within a particular market. Performance risk The value of, and returns (if any) from an investment in the Fund will depend upon the performance of the underlying investments. There is no guarantee the value of an investment in any underlying investment will increase. Tracking Error risk The Fund seeks to minimize the Tracking Error against the Underlying Index it aims to match. There is no guarantee that this objective will be met. Derivative risk The Manager may utilise derivative instruments, including futures to equitise cash, and risk management purposes. Derivatives will not be used to leverage the portfolio.

4 P 4-6 ANALYST: BENJAMIN O SHEA APPROVED BY: SIMON BAIRD ISSUE DATE Currency risk The Fund invests in assets that are denominated in non-australian dollar currencies. The Fund employs a currency hedging mechanism that aims to mitigate, but not eliminate, the effects of foreign exchange movements. Emerging market risk Investments in emerging markets are subject to heightened risks due to a lack of legal, political, business and social frameworks to support securities markets. This means the prices of securities in these countries are generally more volatile than securities in developed economies. Further information Further information can be obtained by calling BetaShares on or visiting

5 P 5-6 ANALYST: BENJAMIN O SHEA APPROVED BY: SIMON BAIRD ISSUE DATE Quantitative Performance Analysis - annualised after-fee % returns (at ) Performance metrics 3 MTH 6 MTH 9 MTH 12 MTH TOTAL RETURN (% PA) STANDARD DEVIATION (% PA) * EXCESS RETURN (% PA) WORST DRAWDOWN (%) TIME TO RECOVERY (MTHS) NR NR NR NR TRACKING ERROR (% PA) * FUND: BETASHARES GLOBAL GOLD MINERS ETF CURRENCY HEDGED BENCHMARK USED: NASDAQ GLOBAL EX-AUSTRALIA GOLD MINERS NR INDEX (AUD HEDGED) * PERIODS LESS THAN 12 MONTHS ARE NOT CALCULATED TIME TO RECOVERY: NR - NOT RECOVERED, DASH - NO DRAWDOWN DURING PERIOD Growth of $10,000 over one year Premium/discount to NAV over one year Monthly excess returns over one year Traded Volume and FUM

6 P 6-6 ANALYST: BENJAMIN O SHEA APPROVED BY: SIMON BAIRD ISSUE DATE Glossary Click here for the glossary of terms. About Lonsec Lonsec Research Pty Ltd (Lonsec) is an investment research house with specialist areas of expertise, that was originally established in 1994 and the current entity was registered on 23 June From 1 July 2011, Lonsec became a fully owned subsidiary of Lonsec Fiscal Holdings Pty Ltd, a privately owned entity with a multibrand strategy of providing leading financial services research and investment execution. Lonsec believes that professional financial advisers need informed opinions on the best investment strategies and financial products to provide real value for their clients. To meet this need, Lonsec has in place an experienced research team, which draws on a robust research process to undertake in-depth assessment of managed fund products. Analyst Disclosure and Certification Analyst remuneration is not linked to the research or rating outcome. 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