2 established Australian ETFs for 2020 and beyond: KSM & ESGI

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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From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

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The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

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