Why it’s time to consider the AUDS and IHCB ETFs in a diverse portfolio

The BetaShares Strong Australian Dollar Fund (Hedge Fund) ETF (ASX: AUDS) and iShares Core Global Corporate Bond (AUD Hedged) ETF (ASX: IHCB) are two ASX ETFs that might be worth digging into in 2020.

BetaShares AUDS ETF

The BetaShares AUDS Fund provides investors with geared exposure to the change in value of the Australian dollar, relative to the US dollar.

As at the end of last month, the AUDS ETF had $11.08 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 AUDS ETF is 1.38%. The issuer, BetaShares, takes this out automatically.

What this fee means is, if you invested, say, $2,000 in the AUDS ETF for a full year you could expect to pay management fees of around $27.60. 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 AUDS Product Disclosure Statement (PDS) because it has the complete and updated information on all fees.

To learn more about AUDS, click here to access our free investment report.

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The iShares IHCB ETF – key points

The iShares IHCB ETF provides investors with access to the performance of investment-grade corporate bonds across global markets and sectors, hedged into Australian dollars. This is a relatively low-cost way to get exposure to global investment-grade corporate bonds in a single fund.

At the end of April 2020, IHCB’s FUM stood at $294.86 million. With IHCB’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 IHCB’s fees too high?

iShares charge a yearly management fee of 0.26% for the IHCB ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $5.20.

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.

If you’re weighing up the AUDS ETF in a diversified portfolio, consider searching our full ETF list to compare fees and costs side-by-side. Another thing you can do is access our comprehensive investment report on AUDS.

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