Is it time to invest in ETFs such as the iShares S&P Asia 50 ETF (ASX: IAA) and VanEck Vectors MSCI World Ex-Australia Quality (Hedged) ETF (ASX: QHAL)? These two ASX ETFs operate in the International shares sector, and aim to make investing in it as convenient as possible.
1. The iShares IAA ETF (ASX:IAA)
The iShares IAA ETF provides exposure to the performance of 50 large, established Asian companies listed on the stock exchanges of China, Hong Kong, South Korea, Singapore, Taiwan, and Macau.
As at the end of last month, the IAA ETF had $501.25 million of money invested. Given IAA’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 IAA ETF is 0.5%. The issuer, iShares, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the IAA ETF for a full year you could expect to pay management fees of around $10.00. 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 0.5%, 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 IAA Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
These are just the basics of the IAA ETF. To learn more, access our free investment report.
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2. The VanEck QHAL ETF (ASX:QHAL)
The VanEck QHAL ETF gives investors exposure to large companies from developed countries around the world, excluding Australia, hedged into Australian dollars.
At the end of May 2020, QHAL’s FUM stood at $185.9 million. With QHAL’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 Index sector should be able to scale well beyond that amount.
Are QHAL’s fees too high?
VanEck charge a yearly management fee of 0.43% for the QHAL ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $8.60.
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 IAA ETF report. Take a look at our free investment report.