2 Down-Under ETFs for investors in 2020 and beyond: IEM & AGVT

We think the BetaShares Australian Government Bond ETF (ASX: AGVT) and iShares MSCI Emerging Markets ETF (ASX: IEM) ASX ETFs could be worthy of closer inspection. Here’s why…

1. The BetaShares AGVT ETF (ASX:AGVT) ETF

The BetaShares AGVT ETF provides investors with exposure to a portfolio of high-quality bonds issued by Australian federal and state governments, supranational banks and sovereign agencies.

According to our most recent data, the AGVT ETF had $62.74 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 AGVT ETF is 0.22%. The issuer, BetaShares, collects this fee automatically.

Meaning, if you invested $2,000 in the AGVT ETF for a full year you could expect to pay management fees of around $4.40. 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 0.5%, which is $10.00 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 AGVT 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 AGVT ETF? View our free investment review.

2. The iShares IEM ETF (ASX:IEM) ETF

The iShares IEM ETF provides investors with exposure to a portfolio of over 800 companies from emerging markets, like China, India and Brazil.

With our numbers for Oct 2020, IEM’s FUM stood at $767.33 million. Since the IEM’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 IEM ETF bad?

iShares, the ETF issuer, charges a yearly management fee of 0.67% for the IEM ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $13.40.

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 IEM ETF review. Simply click here now.

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The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

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