ETF battle: IEM Vs. AGVT

It’s time to put BetaShares Australian Government Bond ETF (ASX: AGVT) and the iShares MSCI Emerging Markets ETF (ASX: IEM) side-by-side.

Why would an investor want the own the BetaShares Australian Government Bond ETF?

The BetaShares AGVT ETF provides investors with exposure to a portfolio of high-quality bonds issued by Australian federal and state governments, supranational banks and sovereign agencies.

As at the end of last month, the AGVT ETF had $12.36 million of money invested. Since its 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. At Best ETFs we say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). 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.

Fees & costs

The yearly management fee on the AGVT ETF is 0.22%. The issuer, BetaShares, takes this out automatically.

What this fee means is, if you invested, say, $2,000 in the AGVT ETF for a full year you could expect to pay management fees of around $4.40. These fees would be automatically deducted from your investment. This does not include any performance fees, and it’s different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.) to buy or sell the ETF. Importantly, you should also be mindful of the ‘spread‘ for the ETF.

Is the ETF too expensive?

The easiest way to know if the ETF is too costly is to compare it with other ETFs in the same sector, and against the industry average. The average management fee (MER) across all of the ETFs covered by Best ETFs Australia is 0.54%, which is around $10.80 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years. What’s more, you should read the AGVT Product Disclosure Statement (PDS) because it has the complete and updated information on all fees.

Don’t stop there, to get our full AGVT ETF review, click here now.

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iShares MSCI Emerging Markets ETF

The iShares IEM ETF provides investors with exposure to a portfolio of over 800 companies from emerging markets, like China, India and Brazil.

At the end of April 2020, IEM’s FUM stood at $660.02 million. With IEM’s FUM over $100 million, we say the ETF has met our minimum criteria for the total amount invested. However, in reality, a very sustainable ETF in the Index sector should be able to scale well beyond that amount.

Are IEM’s fees too high?

iShares charge a yearly management fee of 0.67% for the IEM ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $13.40.

The management fee is above the average for all ETFs on our radar, but keep in mind the ETF may be able to justify it.

To keep discovering what makes the AGVT ETF ‘tick’, so to speak, have a read our free ETF investment report.

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Disclaimer: Any information contained in this article is limited to general financial advice/information only. The information should not be relied upon because it has not taken into account your specific needs, goals or objectives. Please, consult a licenced and trusted financial adviser before acting on the information. Past performance is no guarantee of future performance. Nothing in this article should be considered a guarantee. Investing is risky and can result in capital loss. By reading this website, you acknowledge this warning and agree to our terms & conditions available here. This article is authorised by Owen Raszkiewicz of The Rask Group Pty Ltd.


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