The Vanguard Australian Fixed Interest Index ETF (ASX: VAF) and BetaShares Global Banks ETF – Currency Hedged ETF (ASX: BNKS) are Exchange-Traded Funds (ETFs) operating in the Fixed interest – Australia and International shares sectors, respectively.
How would an investor add VAF to a portfolio?
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.
According to our most recent data, the VAF ETF had $1527.31 million of money invested. With VAF’s total funds under management (FUM) figure over $100 million, the ETF meets our team’s minimum investment criteria for FUM levels. As a general rule, our team draws the line at $100 million for ETFs in the Fixed interest – Australia sector because we believe that, relative to smaller ETFs, achieving this amount of FUM lowers the chance that the ETF issuer will close the ETF.
Fees to consider
According to our numbers, the annual management fee on the VAF ETF is 0.2%. The issuer, Vanguard, collects this fee automatically.
Meaning, if you invested $2,000 in the VAF ETF for a full year you could expect to pay management fees of around $4.00. 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 0.5%, 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 VAF Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
The VAF ETF could be one to add to your watchlist. If you want to access our full ETF review, click here to get our full report – it’s totally free.
Getting to know the BNKS ETF
If you’re looking for an ETF made up entirely of global banks (ex-Australia), then BNKS provides a solution. This ETF tracks the Nasdaq Global ex-Australia Banks Hedged AUD Index.
With our numbers for Oct 2020, BNKS’s FUM stood at $25.72 million. Given it has less than $100 million invested, ask yourself (or your adviser) if the ETF is still too small (and if you should wait to buy into it). If you’re concerned the ETF might not be established enough, compare it alongside one of the other Index sector ETFs, using our full list of ETFs.
Are the fees for the BNKS ETF bad?
BetaShares, the ETF issuer, charges a yearly management fee of 0.57% for the BNKS ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $11.40.
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.
Picking over ETFs seems too easy to be true: ‘just pick one and put it in your bottom-drawer’. However, it’s important to get it right the first time so that you won’t end up having to chop-and-change positions (and potentially pay extra tax). To make your life a little easier, if you’re looking at the BNKS ETF, make sure you click here to access our analyst’s investment report. It’s free.