Would a shrewd ASX investor consider the SPDR S&P/ASX 200 Resource Fund ETF (ASX: OZR) and Vanguard Australian Shares High Yield ETF (ASX: VHY) right about now? These two ASX ETFs provide exposure to the Australian shares sector, and aim to make investing in it as convenient as possible.
The SPDR OZR ETF (ASX:OZR)
The SPDR OZR ETF invests in resources companies from within the ASX 200 and aims to track the S&P/ASX 200 Resources Index.
According to our most recent data, the OZR ETF had $69.67 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 OZR ETF is 0.4%. The issuer, SPDR, collects this fee automatically.
Meaning, if you invested $2,000 in the OZR ETF for a full year you could expect to pay management fees of around $8.00. 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 OZR 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 OZR ETF. To learn more about it, click through to access our free investment review.
The Vanguard VHY ETF (ASX:VHY)
The Vanguard VHY ETF provides exposure to the largest dividend-paying Australian shares, based on market capitalisation and forecast dividend yield. It tracks the FTSE Australian High Dividend Yield Index. The index excludes real estate investment trusts (REITs) and caps the total exposure to any sector/industry at 40%.
With our numbers for July 2020, VHY’s FUM stood at $1345.58 million. Since the VHY’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 VHY ETF bad?
Vanguard, the ETF issuer, charges a yearly management fee of 0.25% for the VHY ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $5.00.
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.
Before you read the Product Disclosure Statement (PDS) or speak to your financial adviser about the OZR ETF report (both are very important), take a look at our free investment review.