If you’re looking for an ASX ETF in the Australian shares sector, chances are, the BetaShares Australian Equities Bear (Hedge Fund) ETF (ASX: BEAR) is an ETF you’re considering. Here’s what you need to know.
How ASX investors can use the BEAR ETF
The BetaShares BEAR Fund is designed to provide inverse or opposite exposure to the largest Australian shares, based on market capitalisation. When the S&P/ASX 200 Accumulation Index falls, BEAR aims to generate positive returns for investors.
The BetaShares BEAR Fund could be used by experienced investors to hedge their portfolio against market declines, effectively betting against the Australian stock market. This is a high risk strategy as gains and losses are magnified, compared to a simple ETF tracking the ASX 200 Index. BEAR is a highly volatile Fund, and there is no guarantee the ETF will provide effective or perfect protection in a falling market.
The BEAR ETF is yet to reach scale
The BetaShares BEAR ETF had $54.76 million of money invested when we last pulled the monthly numbers. With a funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small.
We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). This is because if an ETF is too small, it may not be sustainable for an ETF issuer/provider, such as BetaShares, to continue to operate it.
That said, there are exceptions to this rule of thumb, especially if the ETF issuer is committed to growing the ETF’s FUM to the point where it becomes profitable.
BEAR ETF fees explained
BetaShares charges investors a yearly management fee of 1.48% for the BEAR ETF. This means that if you invested $2,000 in BEAR for a full year, you could expect to pay management fees of around $29.60.
For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.51% or around $10.20 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
Putting it all together
If you’re weighing up investing in BEAR, keep in mind that this is just a brief introduction to the ETF. To supercharge your research, take a look at our free BetaShares BEAR report. Then, consider searching our complete list of ASX ETFs for similar ETFs in the Australian shares sector to compare your options.
