On the ASX, the VanEck Vectors MSCI International Sustainable Equity ETF (ASX: ESGI) and K2 Asset Management Australian Small Cap Fund (Hedge Fund) ETF (ASX: KSM) are two ASX ETFs that could be worthy of closer inspection.
1. VanEck ESGI ETF (ASX:ESGI) – what you need to know
The VanEck ESGI ETF provides exposure to sustainable international companies not including Australian or fossil fuel stocks.
As at the end of last month, the ESGI ETF had $34.41 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 ESGI ETF is 0.55%. The issuer, VanEck, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the ESGI ETF for a full year you could expect to pay management fees of around $11.00. This fee is 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. Small changes in fees can make a big difference after 10 or 20 years. To understand all of the fees, you should read the ESGI Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
If you like the sound of the ESGI ETF, view our free investment report.
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2. The basics of the K2 Asset Management KSM ETF (ASX:KSM)
The K2 KSM Fund is an actively managed small companies fund listed on the ASX. The fund seeks to provide investors with absolute returns, rather than tracking a benchmark.
At the end of April 2020, KSM’s FUM stood at $11.74 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 Hedge fund sector ETFs, using our full list.
Are KSM’s fees too high?
K2 Asset Management charge a yearly management fee of 2.39% for the KSM ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $47.80.
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 get our full ESGI ETF review, click here now.
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