Is it time to invest in ETFs such as the BetaShares Legg Mason Australian Bond Fund (Managed Fund) ETF (ASX: BNDS) and BetaShares India Quality ETF (ASX: IIND)? These two ASX ETFs operate in the Fixed interest – Australia and International shares sectors, respectively.
1. The BetaShares BNDS ETF (ASX:BNDS)
The BetaShares Legg Mason BNDS Fund is an actively managed fund that aims to deliver income and maximise the investment opportunities from Australian fixed income markets.
As at the end of last month, the BNDS ETF had $114.21 million of money invested. Given BNDS’s total funds under management (FUM) figure is over $100 million, the ETF has met our minimum criteria for the total amount of money invested, otherwise known as FUM. We draw the line at $100 million for ETFs in the Fixed interest – Australia sector because we believe that relative to smaller ETFs, achieving this amount of FUM derisks the ETF.
Fees & costs
The yearly management fee on the BNDS ETF is 0.42%. The issuer, BetaShares, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the BNDS ETF for a full year you could expect to pay management fees of around $8.40. 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 BNDS Product Disclosure Statement (PDS) because it has the complete and updated information on all fees.
These are just the basics of the BNDS ETF. To learn more, access our free investment report.
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2. The BetaShares IIND ETF (ASX:IIND)
For investors looking for exposure to the Indian market, IIND is one of the only Australian ETFs that provides this exposure. IIND invests in 30 of the leading Indian companies, based on a quality approach, rather than market capitalisation.
At the end of April 2020, IIND’s FUM stood at $20.87 million. With less than $100 million invested, it’s important to consider if this ETF is still too small and you should wait to buy in. If you’re worried about the size of the ETF, consider comparing it alongside some of the other Quality factor sector ETFs, using our full list.
Are IIND’s fees too high?
BetaShares charge a yearly management fee of 0.8% for the IIND ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $16.00.
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.
Before you read the Product Disclosure Statement (PDS) or speaking to your financial adviser about the BNDS ETF report. Take a look at our free investment report.