The Magellan Airlie Australian Share Fund (Managed Fund) (ASX: AASF) and Schroder Investment Management Australia Limited Real Return Fund (Managed Fund) ETF (ASX: GROW) are Exchange-Traded Funds (ETFs) operating in the Australian shares and Multi-Asset sectors, respectively.
How would an investor add AASF to a portfolio?
The Airlie Australian Share Fund invests in 15-35 companies on the Australian stock exchange using a ‘best ideas’ approach to active investing. The fund aims to have no more than 10% of its portfolio in cash. The AASF fund aims to provide long-term capital growth and regular income to their investors.
According to our most recent data, the AASF ETF had $34.89 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 AASF ETF is 0.78%. The issuer, Magellan, collects this fee automatically.
Meaning, if you invested $2,000 in the AASF ETF for a full year you could expect to pay management fees of around $15.60. 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 AASF Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
The AASF 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 GROW ETF
The Schroder GROW Fund is a multi-asset class, actively-managed portfolio of global assets. The fund aims to deliver a return of 5% per annum above inflation (before fees), over a rolling 3-year period.
With our numbers for Oct 2020, GROW’s FUM stood at $38.88 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 Active ETF (e.g. ETMF) sector ETFs, using our full list of ETFs.
Are the fees for the GROW ETF bad?
Schroder Investment Management Australia Limited, the ETF issuer, charges a yearly management fee of 0.9% for the GROW ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $18.00.
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.
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 GROW ETF, make sure you click here to access our analyst’s investment report. It’s free.