The BetaShares Global Income Leaders ETF (ASX: INCM) and VanEck Vectors Australian Subordinated Debt ETF (ASX: SUBD) are Exchange-Traded Funds (ETFs) operating in the International shares and Fixed interest – Australia sectors, respectively.
How would an investor add INCM to a portfolio?
The BetaShares INCM ETF provides investors with exposure to a diversified global portfolio of 100 high-yielding companies (ex-Australia), with a focus on companies that are able to generate sustainable income for investors.
According to our most recent data, the INCM ETF had $16.92 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 INCM ETF is 0.45%. The issuer, BetaShares, collects this fee automatically.
Meaning, if you invested $2,000 in the INCM ETF for a full year you could expect to pay management fees of around $9.00. 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 INCM Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it will detail the fees, tax implications and the latest information.
The INCM 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 SUBD ETF
The VanEck SUBD ETF invests in a portfolio of Australian dollar-denominated subordinated bonds from a range of banks and insurance companies.
With our numbers for Dec 2020, SUBD’s FUM stood at $124.9 million. Since the SUBD’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 SUBD ETF bad?
VanEck, the ETF issuer, charges a yearly management fee of 0.29% for the SUBD ETF. Meaning, if you invested $2,000 for a full 12-month period you could expect to pay a base management fee of around $5.80.
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.
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 SUBD ETF, make sure you click here to access our analyst’s investment report. It’s free.