BetaShares Global Gold Miners ETF (ASX:MNRS)
- Name: BetaShares Global Gold Miners ETF
- ASX ticker code: MNRS
- Issuer: Betashares
- Management Expense Ratio (MER): search our complete list
- Exposure: Global shares - Gold focused
- Potential allocation: Tactical
What does MNRS do?
The BetaShares Global Gold Miners ETF (ASX: MNRS) invests in shares of the largest gold miners around the world. This is more indirect exposure to gold compared to physically backed gold ETFs like ASX:GOLD and PMGOLD.
What is MNRS used for?
The performance of MNRS will be affected by the price of gold, the share price performance of the companies and investor sentiment towards the shares. As such, we think investors could expect MNRS to be more volatile than a physically-backed gold ETF as there are several different factors influencing the price of the ETF.
However, if investors believe gold prices and shares of gold mining companies are undervalued this ETF could be something to consider.
What does MNRS Invest In?
The MNRS ETF hold shares in companies based around the world, but a large majority are in Canada, South Africa and the US. The MNRS ETF is also currency-hedged, meaning all foreign currency exposure is hedged to the Australian dollar.
BetaShares is one of Australia's largest ETF issuers, by number of ETFs issued on the ASX. At the end of 2018, Betashares had $6.1 billion of money invested in its ETFs.
BetaShares was founded in Sydney by a group of finance professionals who have a venture capital (VC) business called Apex Capital Partners. BetaShares was an 'in house' investment for Apex but grew quickly as ETFs took off.
Betashares is part-owned by Mirae Asset Global Investment Group, a specialist ETF business which manages nearly $130 billion.
$6b+ invested in BetaShares ETFs
BetaShares launched its first ETF in 2010 but has grown its ETF count rapidly to have around 50 ETFs in the market today.
The bestETFs global shares sector includes ETFs, managed funds and index funds which cover international equities/share markets. The most popular global shares markets for ETFs include:
- The USA
- Europe & the UK
- Emerging Markets (EM)
- Asia (including China)
With around 98% of shares listed on markets outside of Australia, we think it's vital for Australian investors to consider looking abroad for exposure to some of the world's best companies, including those from the technology, communications and health care sectors.
Over the ultra-long-term, global shares have proven to be among the best-performing asset classes. However, it is also one of the riskier investments you can make, as measured by standard deviation or volatility.
Hedged or Unhedged?
When you're investing in global ETFs it's worth noting whether or not you're prepared to take on the risk that the currency moves in your favour or against you. Typically you'll have two options:
- Hedged ETFs will attempt to 'lock-in' the exchange rate at the time you make your investment
- Unhedged ETFs do not provide protection against movements in the currency
Which one is better? That's up to you.
Just keep an eye on the costs of the hedged versus unhedged versions of the strategy/ETF and consider your own risk profile.
Finally, take note of where your international ETF is 'domiciled' by reading its PDS or the ETF Issuer's website because this -- sometimes hidden -- feature could meaningfully affect your tax.
- Australian domiciled ETFs - these are registered and regulated in Australia and are 'Australian residents' for tax purposes. These are just like an ordinary share or ETF you would buy on the ASX and the tax paperwork is filled out by the fund manager at the fund level.
- Foreign domiciled, 'cross-listed' or CDI ETFs - these ETFs are registered offshore and provide a beneficial interest to investors via a 'CDI' listing on the ASX. Sometimes these ETFs may require additional paperwork for taxes, such as filling in a US W8-BEN form to reduce withholding tax or expose ETF investors to foreign regulation or U.S. Estate Taxes.
Consult with your tax and/or financial adviser before investing.
Here at Best ETFs Australia, we'll assess the performance of a commodity ASX ETF against the price of the underlying commodity, where available, on a post-fee basis:
- Gold ETFs - we'll use international gold prices either in Australian dollars (for hedged ETFs) or US dollars (for unhedged ETFs)
- Oil prices - we'll use WTI crude prices (based on spot prices or futures contracts)
- Other commodities - again, this will be based on the performance of the most relevant index in the currency which is relevant for the ETF investor (e.g. commodity metals price index for precious metals ETFs)
When you invest in commodities (like gold, silver or oil), you may be lowering some of your risks. For example, you won’t have all of your eggs in your ‘Australia basket’.
However, there are extra risks added when you invest in commodities. Some of these risks include:
- Market/price risk - we believe predicting the price of gold, oil and other commodities with certainty is impossible. If you choose to invest in a commodity ETF you must accept that the value of your investment could be significantly influenced by factors outside of your control, including political, regulatory and financial risks; and gold production and demand risks, to name a few. Often, the price of some commodities will move higher with global uncertainty. However, there are no guarantees this will happen in the future.
- Sovereign/regulatory risks – Governments and regulators throughout the world can change their policies on inflation, trade, investing, taxes and even the rights of people and investors. Australia has a very stable and robust financial, legal, political and societal system — many countries don’t.
- Supply of commodities - supply and demand for gold, silver, platinum and oil can work for you or against you. Prices are often influenced by investor demand, competing uses for the commodity (e.g. jewellery, LNG) and macroeconomic factors (e.g. inflation, US interest rates). Supply can be impacted by miners' exploration and production success and large financial institutions (e.g. investment banks and central banks).
- Liquidity risk – if we experience a shortage of commodities and spike in demand there's a chance the price of a commodity could jump but the price of the ETF (inside your share brokerage account) could rise even higher. This would create a situation in which you, the investor, could overpay for the actual commodity which will be bought by the ETF issuer.
- Synthetic exposure - many commodity ETFs will NOT physically own or store a commodity (e.g. oil) on behalf of its investors. Instead, they'll use derivative contracts to get you exposure to the commodity. This can create significant risks such as counterparty risk (see below) and delivery risk. Make sure you read the PDS of the ETF you're considering before you invest. The PDS will tell you where the commodity is -- or isn't -- stored. The PDS should be available on the ETF issuer's website.
- Counterparty risk & holding structure – Some ETF issuers use complicated holding structures to get you exposure to the underlying investment overseas. In Australia, ASX-listed shares and ETFs use the same system to ‘settle’ transactions and ‘hold’ your ETFs in your name, it’s called the CHESS system. However, if the ETF invests in overseas assets and commodities it’s likely those assets will be held using another system or holding structure governed by other rules. Rest assured there are some safeguards in place. However, you should always do your research, read the ETF’s Product Disclosure Statement (PDS) or consult a licensed financial adviser. If your commodity ETF insured against loss or theft?
- FX/currency risks – A big reason many investors put their money overseas is to get exposure to another country’s currency. For example, if you invest 1 AUD into US Dollars at a currency exchange rate of 1.00, you will get 1 USD in return. If the USD gets stronger (meaning the Aussie dollar exchange rate falls), your 1 USD is now worth more! However, it can go in the opposite direction. For example, if the AUD-USD goes to 1.10, your 1 USD (bought at a lower exchange rate) is now worth less in AUD terms than before. This risk is the reason why some ETFs are currency ‘hedged’ — to avoid the impact of currency fluctuations.
When you invest globally, you may be lowering some of your risks. For example, you won't have all of your eggs in your 'Australia basket'.
However, there are extra risks added when you invest overseas. Some of these risks include:
- Sovereign/regulatory risks - Governments and regulators throughout the world can change their policies on investing, taxes and even the rights of people and investors. Australia has a very stable and robust financial, legal, political and societal system -- many countries don't.
- FX/currency risks - A big reason many investors put their money overseas is to get exposure to another country's currency. For example, if you invest 1 AUD into US Dollars at a currency exchange rate of 1.00, you will get 1 USD in return. If the USD gets stronger (meaning the Aussie dollar exchange rate falls), your 1 USD is now worth more! However, it can go the opposite direction. For example, if the AUD-USD goes to 1.10, your 1 USD (bought at a lower exchange rate) is now worth less in AUD terms than before. This risk is the reason why some ETFs are currency 'hedged' -- to avoid the impact of currency fluctuations.
- Counterparty risk & holding structure - Some ETF issuers use complicated holding structures to get you exposure to the underlying investment overseas. In Australia, ASX-listed shares and ETFs use the same system to 'settle' transactions and 'hold' your ETFs in your name, it's called the CHESS system. However, if the ETF invests in overseas shares it's likely those shares will be held using another system or holding structure governed by other rules. Rest assured there are some safeguards in place. But you should always do your research, read the ETF's Product Disclosure Statement (PDS) or consult a licensed financial adviser.
- Timezone - Often, global sharemarkets will be open when you're asleep. Conversely, Australian sharemarkets (where you buy into the ETFs) operate when the rest of the world is asleep. That makes tracking the latest ETF prices a little more difficult for you and for ETF issuers. This could lead to changes in the 'unit price' or the "net asset value" (NTA) of the ETF overnight.
We believe this ETF should be used as part of a 'tactical' or 'satellite' allocation in a diversified long-term portfolio because of its unique strategy, costs, risk-reward profile and the expectation of long-term returns.
What is The Core-Satellite Approach?
When you're investing in ETFs or managed funds, we think it's a good idea to consider breaking up your overall investments into two 'buckets':
Bucket 1: Core Investments
The 'core' is the larger part of your investment portfolio and could be reserved for a few different ETFs, blue-chip shares and/or managed funds. For example, you might have three diversified, low-cost and easy to understand ETFs in the 'core' of your portfolio. Each ETF might have between 20% and 30% of your money.
If you're new to investing, the core is a good place to start.
Core ETFs might include:
Bucket 2: Satellite/Tactical Investments
The 'satellite' or tactical bucket is the smaller part of your portfolio (e.g. 0% to 30% of your entire portfolio). In this section, you might decide to take more risk, invest in unique or unproven strategies, buy fast-growth individual shares, etc.
Tactical strategies could be higher risk, higher cost and more complicated strategies that you use in the hope of outperforming the averages (e.g. ASX 200, S&P 500, etc.).
Tactical ETFs might include:
The bestETFs website currently provides free access to a database of Australian ETFs, index funds and (soon) selected managed funds. If you want to access our top Australian ETF picks and research (for a small fee), please click here to learn more.
How do we pick ETFs?
All of the selected ETFs in our model portfolio must meet our strict criteria before we'll consider recommending them.
To learn more about our research and access the bestETF model portfolio, please click here.
For our #1 ETF idea of 2019, please click here (free).
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What Is An ETF?
Investing in an Exchange Traded Fund or ETF is typically a way to buy a tiny slice of many different shares, bonds or currencies with one investment. Technically, ETFs are 'funds' or legal 'trusts' which allow investors to pool their money together in one place and invest in the same strategy.
What Is An Index Fund?
An index fund is a type of 'managed fund' which pools money in one place and follows an index. For example, an ASX 200 index fund buys all 200 shares included in the S&P/ASX 200 index maintained by Standard & Poor's.
What's The Difference Between An 'Active' and 'Passive' Investment?
Traditionally, 'active' investors pick individual stocks they think will outperform the market (e.g. ASX 200 index). For example, an 'active' fund manager would pool investors' money together and invest that money in their best stock ideas.
'Passive' investors are investors who buy into standard index funds, like one that follows the ASX 200 or USA's S&P 500. These are also run by fund managers but they don't use their 'skills' or 'analysis' to pick individual stocks. Instead, they invest in the entire market and investors benefit from the growth of all companies, on average.
What Are Rules-Based Investments?
In recent times we've witnessed the emergence of 'rules-based' or 'smart beta' investment strategies, which are kind of in-between active and passive.
Typically, these strategies use automated rules to invest with strategies covering stocks/shares, bonds/fixed income, currencies, commodities (e.g. gold) and derivatives contracts (e.g. options). For example, a rule might be 'buy this share if XYZ happens' or 'sell that share if ABC is true', etc..