Would a shrewd ASX investor consider the iShares Global 100 AUD Hedged ETF (ASX: IHOO) and Russell Investments Australian Select Corporate Bond ETF (ASX: RCB) right about now? These two ASX ETFs invest in the International shares and Fixed interest – Australia sectors, respectively.
The iShares IHOO ETF (ASX: IHOO)
The iShares IHOO ETF provides investors with exposure to the largest 100 global companies. This is a low-cost way to access a variety of global companies through a single fund.
According to our most recent data, the IHOO ETF had $76.89 million of money invested. Given its funds under management (also known as FUM or ‘market cap’) is less than $100 million, you should consider if this ETF is still too small and if it is sustainable for the ETF issuer. 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 general rule, especially if the ETF issuer/provider is reputable and committed to growing the ETF’s FUM through effective marketing strategies and distribution to financial advisers.
Fees to consider
According to our numbers, the annual management fee on the IHOO ETF is 0.43%. The issuer, iShares, collects this fee automatically.
Meaning, if you invested $2,000 in the IHOO ETF for a full year you could expect to pay management fees of around $8.60. This fee is different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.), which is the fee to buy or sell the ETF. In addition to a management fee charged by the issuer, be mindful to check the ‘spread‘ for the ETF.
Passing the fee test
Keep in mind that fees aren’t the only important consideration for ETF investors, but it’s an easy thing to do. To know if the ETF you’re looking at is too costly, compare it with other ETFs from the same sector, and against the industry average. For example, the average management fee (MER) across all of the ETFs covered by the Best ETFs Australia team was 0.51%, which is $10.20 per $2,000 invested. Keep in mind that small changes in the fees paid can make a big difference after 10 or 20 years. You should read the IHOO Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
These are high level ideas or basics of the IHOO ETF. To learn more about it, click through to access our free investment review.
The Russell Investments RCB ETF (ASX: RCB)
The Russell Investments RCB ETF is a portfolio of high-quality Australian fixed income securities that meet a range of size, credit and maturity selection criteria.
With our numbers for July 2020, RCB’s FUM stood at $241.06 million. Since the RCB’s FUM is over $100 million, our investing team would say the ETF has met our minimum criteria for the total amount invested, otherwise known as FUM. A very sustainable ETF in the Index sector should be able to scale well and become profitable for the ETF issuer.
Are the fees for the RCB ETF bad?
Russell Investments, the ETF issuer, charges a yearly management fee of 0.28% for the RCB ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $5.60.
The management fee is above the average for all ETFs on our list of ASX ETFs, but keep in mind the ETF may be able to justify the higher price tag with superior performance over time.
Before you read the Product Disclosure Statement (PDS) or speak to your financial adviser about the IHOO ETF report (both are very important), take a look at our free investment review.
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