You might be sitting back and considering the BetaShares AMP Capital Dynamic Markets Fund (Hedge Fund) ETF (ASX: DMKT) and thinking that May could be as good of a time as any to take closer look.
What does the DMKT do for a diversified portfolio?
The AMP Capital DMKT Fund is an actively managed hedge fund, with the aim of returning 4.5% p.a. above inflation, on a rolling 5-year basis. What that means is DMKT may use rebalancing in combination with active investment strategies to outperform the market over time.
Pay attention to FUM
As at the end of last month, the DMKT ETF had $7.56 million of money invested. With a funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small. We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least) because if an ETF is too small it may not be sustainable for an ETF issuer, such as BetaShares. However, there are exceptions to this rule of thumb, especially if the ETF issuer/provider is committed to growing the ETF’s FUM to the point where it becomes profitable.
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Consider the ETF’s fees & costs
With a yearly management fee of 0.5% charged by BetaShares, if you invested $2,000 in the DMKT ETF for a full year you could expect to pay management fees of around $10. This does not include any performance fees earned by the ETF’s manager for doing a good job. For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.54% or around $10.8 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
In addition to a yearly management fee, there are other costs investors must consider, including brokerage and taxes. A specific cost for ETF and mFund investors to consider is the buy-sell spread, which is the slippage or ‘invisible’ cost paid by an investor when he or she buys or sells the ETF. For the DMKT ETF, the most recent average monthly buy-sell spread we gathered (April 2020) was 0.99%. Remember, the lower (or ‘tighter’) the buy-sell spread, the better. This buy-sell spread was above the average ETF spread of 0.51%, which means the DMKT ETF has more slippage than the average ETF (that’s a bad thing).
These are just some of the considerations or factors you would need to look at when weighing up the DMKT ETF. Before doing anything, take a look at our BetaShares DMKT report – it’s free. While you’re at it, don’t forget to search our complete list of ASX ETFs.