How and why Aussie investors use the ESTX ETF
The ETFS ESTX ETF provides investors with exposure to 50 blue-chip companies from 12 eurozone countries; namely Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
As of early June 2020, the ESTX ETF had around $51 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, like ETF Securities, is committed to growing the ETF’s FUM to the point where it becomes profitable.
Fees & costs
The yearly management fee on the ESTX ETF is 0.35%. The issuer, ETF Securities, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the ESTX ETF for a full year you could expect to pay management fees of around $7.00. 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 ESTX Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
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Getting to know the MGE ETF
The Magellan MGE Fund is an actively managed portfolio that invests in a select array of international companies. The fund typically selects between 20-40 global equities.
At the end of April 2020, MGE’s FUM stood at $1671.99 million. With MGE’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 Hedge fund sector should be able to scale well beyond that amount.
Are MGE’s fees too high?
Magellan charges a yearly management fee of 1.35% for the MGE ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $27.00.
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.
We’ve got a full ESTX ETF review available on our website right now. Click here to access our comprehensive investment report.