Introducing Exchange Traded Funds

Transcription

1 Introducing Exchange Traded Funds Wealth International

2 At Momentum, we continually strive to enhance our investment offering to meet the needs of our investors. We have a proud heritage of providing an extensive range of international products and solutions to ensure that you are suitably equipped to manage your clients portfolios in order to meet their investment needs and goals. Momentum Wealth International is pleased to announce the addition of Exchange Traded Funds (ETFs) to our market-leading international platform. The inclusion of ETFs to the range of investment options that are available on the Momentum Wealth International investment platform serves to further broaden the diversification opportunities and choices available to our business partners and investors. Introducing ETFs onto Momentum Wealth International means that investors can now blend passive and active international funds within their investment(s) to meet their future investment needs. Page 2 of 8 Wealth International Exchange Traded Funds 2017

3 What are Exchange Traded Funds (ETFs)? ETFs are funds that typically track an index in an attempt to replicate its performance. Traditionally, ETFs do not try to beat the market but rather attempt to replicate a predetermined index s performance. ETFs have daily liquidity and are often characterised by lower fees when compared to actively managed collective investment schemes. ETFs have become important investment building blocks, making them an attractive alternative for investors, providing a relatively low-cost and targeted way to track index returns and gain convenient access to a wide range of asset classes and global markets. Momentum ETF range Initially Momentum is introducing a range of ETFs that are all listed and traded on the London Stock Exchange. This includes ETFs that track a broad range of indices as well as others that have been constructed to track some sector strategies such as listed real estate and infrastructure. Global equity smart beta options that provide style-tilted global equity exposure have also been included. This will contribute to the choice and flexibility that you have come to experience and enjoy from Momentum Wealth International. The ETF fund list and fund fact sheets can be located on the Momentum Wealth International post-login website on Important technical information: Trading Momentum Wealth International executes ETF trades, once a day, on the London Stock Exchange via our ETF Trader. Trades are executed at the first available opportunity after the 12:30 GMT cut-off time. Only whole shares can be traded. ETFs are available to all investors. However, during the launch phase ETFs will not be available for inclusion in Strategic Portfolios nor Managed Portfolio Services. Trading costs A once-off ETF trading cost of 0.15% of the trade amount is payable to our ETF Trader. The buy and sell price is inclusive of the ETF trading cost. In addition to this the standard Momentum Wealth International platform trading costs apply. Base/dealing currency Momentum Wealth International displays the base /dealing currency of the ETF on its website and only trades in the currency stated on the ETF fund list. How to invest Simply complete the desired ETF name on the new business/additional investment application forms or for existing investments, complete a switch form. These forms are available on the Momentum Wealth International post-login website. Please note that standard bank charges will apply to switch instructions. Contract notes and statements Contract notes are generated automatically at each stage of the ETF investment process. These notifications are intended to inform you of the status of the ETF instruction. ETFs are displayed on statements in the same way as other investment components. Please note that the value of the ETF on the client s statement is displayed in the base trading currency. The last available close-of-day price will be used for client valuations and statements. Tax Any potential tax implications that may arise as a result of investing in ETFs are determined by the specific tax jurisdiction of the investor s tax residence. Wealth International Exchange Traded Funds 2017 Page 3 of 8

4 ETF Frequently Asked Questions What type of ETF service does the Momentum Wealth International platform provide? ETFs can be included in a client s portfolio as part of their medium to long-term investment horizon. As Momentum Wealth International is not a stockbroker it does not look to replicate stockbroker functionality such as continuous trading or client specified standard trade order types (for example limit orders, fill-or-kill or at market orders). Instead, Momentum Wealth International will aggregate client orders and trade once a day (at around 12:30 GMT). What type of ETFs will be available through Momentum Wealth International? A wide range of ETFs are available. To qualify for inclusion on the Momentum Wealth International platform an ETF must meet the following criteria: a) Able to be traded and administered by our ETF Trader; b) Traded on the London Stock Exchange (during launch phase only); c) Supply data to Morningstar; d) Cash distributing; e) UCITS or UCITS eligible; f) High level of liquidity; and g) Un-leveraged. Are ETFs available in multiple currencies? The Momentum Wealth International platform does facilitate multi-currency trading i.e. an investor can invest in say sterling (GBP) and can then invest in ETFs (in addition to traditional funds) denominated in other currencies such as United States dollars (USD) and euro (EUR). Trades in ETFs are only placed in the base/dealing currency of the ETF. Is there a range of ETFs available through the Momentum Wealth International platform immediately? Yes, we have carefully selected ETFs from a number of leading global providers which cover a a comprehensive range of geographic regions, asset classes and investment styles. The range of ETFs currently available can be found by logging into and viewing the Fund Selector tab. Page 4 of 8 Wealth International Exchange Traded Funds 2017

5 How will ETFs be traded? It is not possible to buy fractions of an ETF (unlike funds). In order to accommodate this restriction, Momentum Wealth International calculates and processes BUY orders to ensure that clients receive a non-fractional number of ETFs whilst ensuring that the purchase is not made for a value higher than required (using a limit or best buy instruction calculated with reference to the 15 minute delayed ETF price plus a limit price variance). There is no minimum amount per ETF trade. SELL trades will be aggregated and instructed as a market order, and orders will also be calculated so that clients sell whole shares. When an aggregated ETF trade cannot be executed, the trade will be positioned for the following trade day and the same process followed again. Should the trade still be unable to be executed on the subsequent trade date, the instruction will be cancelled and the intermediary promptly informed. In the case of a partially filled order, the amount of shares bought will be proportionately distributed between investors in the bulked trade. What are the trading costs for ETFs on the Momentum Wealth International platform? The trading costs for ETFs are 0.15% on entry and exit. This 0.15% cost per trade is the broker commission charged at cost (Momentum Wealth International doesn t receive any ETF specific revenue). Although the buy price and the sell price includes broker commission, this is fully disclosed on the Momentum Wealth International client contract note and statements as the ETF Trading Cost. In addition to this the normal platform Transactional Bank Charges apply - US$50 for subscription/new money in; US$35 for switch trades and US$35 for redemption trades (all irrespective of the number of funds or ETFs in the trade). So if the investor instructs a buy with new money of four funds and one ETF the platform trade fee is US$50 and then an ETF Trading Cost of 0.15% for the ETF allocation. How and when will the ETF be priced? As described above, the client s contract note reflects the price of the ETF trade achieved in the market. Valuation statements show the last available close of day price for an ETF. Can a financial adviser take commission on ETF trades? No. There is no initial fund commission or rebates available on ETFs. Financial advisers can receive the standard Annual Advice Fees on the Momentum Wealth International platform whether portfolios wholly or partly contain ETFs. Wealth International Exchange Traded Funds 2017 Page 5 of 8

6 Can a client hold a mix of funds and ETFs? Yes. Each Momentum Wealth International investment allows for a client to hold their desired combination of funds and ETFs. Switch instructions between ETFs and funds, and vice versa, and between ETFs is permitted, within Momentum Wealth International s normal investment restrictions. How will ETFs appear on the platform website, application forms and statements? ETFs appear on the website in the same way as standard funds. Advisers complete a single investment instruction that includes both funds and ETFs. ETF fact sheets are available on the website in the same way as traditional fund factsheets. On client statements ETFs are displayed in a separate section. Are there any specific risks resulting from investing in ETFs? In addition to the innate investment risk, the primary risks attributable to ETFs are related to the index replication methodology. To limit this particular risk it is advisable to invest in physically backed ETFs, as derivative backed ETFs may present undesirable counterparty risks. In this regard, there are a vast number of well-priced, liquid, physically backed vehicles available. Several alternative risks are similarly proactively managed in a UCITS regulatory framework. Please note that liquidity risk is also an important consideration. The main source of investment risk in an ETF inevitably comes from the index that it is attempting to track. Therefore it is important to do research into the index that is being tracked to ensure it is suitable for the particular investor needs. How does the cost of investing in ETFs on the Momentum Wealth International platform compare with investing in funds? ETFs are passive investment vehicles and are often priced at a lower fee than actively managed funds. The costs of the ETF should be borne in mind because this impacts the ability of the vehicle to track the reference index. The Total Expense Ratio (TER) is often easily identified on the fund fact sheets. Please note that there is also an additional 0.15% trading cost on ETF trades via the Momentum Wealth International platform. Page 6 of 8 Wealth International Exchange Traded Funds 2017

7 What is an ETF Cash Account? An ETF Cash Account is set up automatically to hold residual cash, after the settlement of ETF trades. What if an ETF that I want to include in my client s portfolio is not in the Momentum ETF range? Momentum Wealth International applies set criteria when evaluating whether an ETF qualifies for inclusion on the platform. Should you wish to have an ETF added to the platform please complete the Fund Addition request form. The form can be found post log in on on the funds tab and submitted to client.services@ momentum.co.gg. Wealth International Exchange Traded Funds 2017 Page 7 of 8

8 Contact us Momentum Wealth International Limited Physical Address for courier Momentum Wealth International 268 West Avenue Centurion 0157 South Africa Mail us Fax us +27 (0) Visit us Talk to us Share call number Tel +27 (0) International number Tel +27 (0) Disclosure Momentum Wealth International Limited may from time to time change these business practices without prior notice. Financial advisers are therefore advised to always consult the latest version of this document which is available on our website, document should be read in conjunction with the relevant product brochure and Terms and Conditions. Whilst all care has been taken in the preparation of the information contained in this document, Momentum Wealth International Limited does not make any representations or give any warranties as to the correctness, accuracy or completeness of the information, nor does Momentum Wealth International Limited assume liability or responsibility for any losses arising from errors or omissions in the information. The opinions in this document apply from the date it is made available and relate to this document only. The information and opinions are of a general nature and are not to be deemed advice. Momentum is not responsible for any use of this document or responsible to any other person or entity for any inaccurate information in it or for any error or omission, regardless of the cause of the inaccuracy, error or omission. Past performance of any investment is not necessarily a guide to the future. Fluctuations in the value of underlying assets of an investment portfolio, the income from them and changes in interest or exchange rates mean that the value of the portfolio and any income arising from it may fall as well as rise and is not guaranteed. Any information in this document is not intended nor does it constitute financial, tax, legal, investment, or other advice. Nothing contained in this document constitutes a solicitation, recommendation, endorsement or offer by Momentum Wealth International Limited. This document may not be circulated or copied where it may constitute an infringement of any local laws or regulations. This document is for the sole use of the intended recipient and may not be reproduced or circulated without the prior written approval of Momentum Wealth International Limited. Momentum Wealth International Limited Registered address: La Plaiderie House, La Plaiderie, St Peter Port, Guernsey, Channel Islands, GY1 1WF Registered in Guernsey No Postal address: PO Box 166, La Plaiderie House, La Plaiderie, St Peter Port, Guernsey, Channel Islands, GY1 4HE Switchboard +44 (0) Momentum Wealth International Limited is licensed by the Guernsey Financial Services Commission to conduct Investment Business Momentum Wealth International Limited is an authorised Financial Services Provider pursuant to the Financial Advisory and Intermediary Services Act No. 37 of 2002 in South Africa A member of the MMI Holdings Group investments