Why it’s time to consider the ETHI and MHG ETFs in a diverse portfolio

The BetaShares Global Sustainability Leaders ETF (ASX: ETHI) and Magellan Global Equities Fund Currency Hedged (Managed Fund) ETF (ASX: MHG) are two ASX ETFs that might be worth digging into in 2020.

BetaShares ETHI ETF

The BetaShares ETHI ETF provides investors with exposure to a diversified portfolio of global companies that fit within the environmental, social and governance (ESG) framework set, along with screening out companies with significant exposure to fossil fuels. ETHI has been certified by the Responsible Investment Association Australasia (RIAA), as part of the Responsible Investment Certification Program.

As at the end of last month, the ETHI ETF had $664.85 million of money invested. Given ETHI’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 International shares 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 ETHI ETF is 0.59%. The issuer, BetaShares, takes this out automatically.

What this fee means is, if you invested, say, $2,000 in the ETHI ETF for a full year you could expect to pay management fees of around $11.80. 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 0.5%, which is around $10.00 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 ETHI Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.

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

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The Magellan MHG ETF – key points

The Magellan MHG Fund is an actively-managed portfolio that invests in a select array of international companies. The fund typically selects between 20-40 global equities and hedges its exposure against the Australian dollar to manage currency risks.

At the end of May 2020, MHG’s FUM stood at $217.31 million. With MHG’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 MHG’s fees too high?

Magellan charge a yearly management fee of 1.35% for the MHG 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.

If you’re weighing up the ETHI 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 ETHI.

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