Would a shrewd ASX investor consider the Morningstar International Shares Active ETF (Managed Fund) ETF (ASX: MSTR) and Vanguard Diversified High Growth Index ETF (ASX: VDHG) right about now? These two ASX ETFs invest in the International shares and Diversified ETF sectors, respectively.
The Morningstar MSTR ETF (ASX:MSTR)
The Morningstar MSTR Fund is an actively-managed fund that invests in a select portfolio of international companies for long-term capital growth. The fund hedges its exposure against the Australian dollar to manage currency risks.
According to our most recent data, the MSTR ETF had $90.07 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 MSTR ETF is 0.39%. The issuer, Morningstar, collects this fee automatically.
Meaning, if you invested $2,000 in the MSTR ETF for a full year you could expect to pay management fees of around $7.80. 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 0.5%, 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 MSTR 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 MSTR ETF. To learn more about it, click through to access our free investment review.
The Vanguard VDHG ETF (ASX:VDHG)
The Vanguard VDHG ETF provides investors with exposure to a portfolio of other Vanguard funds. This ETF gives investors exposure to multiple asset classes with a single purchase, and is designed to be a diversified portfolio in itself.
With our numbers for Oct 2020, VDHG’s FUM stood at $524.17 million. Since the VDHG’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 Diversified sector should be able to scale well and become profitable for the ETF issuer.
Are the fees for the VDHG ETF bad?
Vanguard, the ETF issuer, charges a yearly management fee of 0.27% for the VDHG ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $5.40.
This management fee is below the average for all ETFs on our Best ETFs Australia list of ETFs. However, you might still be able to find a cheaper ETF for less.
Before you read the Product Disclosure Statement (PDS) or speak to your financial adviser about the VDHG ETF report (both are very important), take a look at our free investment review.