We think the K2 Asset Management Australian Small Cap Fund (Hedge Fund) ETF (ASX: KSM) and Vanguard Australian Fixed Interest Index ETF (ASX: VAF) ASX ETFs could be worthy of closer inspection. Here’s why…
1. The K2 Asset Management KSM ETF (ASX:KSM) ETF
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.
According to our most recent data, the KSM ETF had $11.74 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 KSM ETF is 2.39%. The issuer, K2 Asset Management, collects this fee automatically.
Meaning, if you invested $2,000 in the KSM ETF for a full year you could expect to pay management fees of around $47.80. 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.
A fee comparison
Fees aren’t the only key consideration for ETF investors, but it’s an easy thing to do. To understand 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 KSM Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
Want to hear more about the KSM ETF? View our free investment review.
2. The Vanguard VAF ETF (ASX:VAF) ETF
The Vanguard VAF ETF provides investors with exposure to a portfolio of Australian Commonwealth Government bonds, state government bonds and bonds from treasury corporations, as well as some investment-grade corporate debt.
With our numbers for July 2020, VAF’s FUM stood at $1415.5 million. Since the VAF’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 VAF ETF bad?
Vanguard, the ETF issuer, charges a yearly management fee of 0.2% for the VAF ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $4.00.
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.
Want to know more? Get our team’s free KSM ETF review. Simply click here now.