Z3RO ETF report

Pinnacle Investment Management Z3RO ETF (ASX:Z3RO)

The Z3RO ETF is issued by Pinnacle and managed by Omega Global Investors. Z3RO is designed to invest in short-term money market securities such floating rate notes (FLNs), certificates of deposit, cash, corporate paper and discount securities.

This free report is issued by Best ETFs Australia, a division of The Rask Group Pty Ltd. It is not a recommendation. Speak to a financial professional before relying on this information and please read our Financial Services Guide (FSG).

Z3RO ETF Fast Facts

Cash – Australian sector

Active ETF (e.g. ETMF) strategy

Issuer: Pinnacle Investment Management


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Pinnacle Investment Management Z3RO ETF (ASX:Z3RO) key information

Ticker code: Z3RO Exchange: ASX Yearly fee: See ETF list
Geography: Australia Sector: Cash – Australian Distribution frequency: Monthly
DRP: No DRP Domicile: Australia Issuer: Pinnacle Investment Management
Registry: Automic ISIN code: AU0000055329 IRESS code: Z3RO

Z3RO: Track Record Warning

When an ETF does not have a sufficiently long track record -- typically, we consider this to be at least 3 years -- the ETF is could be at a higher risk of being closed down (if it doesn't grow), and the historical performance and returns (if any) cannot be relied upon.

Some of the risks associated with an ETF that has a short or no track record include:

  • Performance - When a fund, ETF or investment firm does not have a track record, it is often difficult to know what to expect from the investment. This is not the case with all ETFs that are new, especially if the ETF follows a highly liquid benchmark that has been in existence for five years or more. However, we apply the track record warning as a reminder to investors that it's important to think long and hard about how this ETF will perform, and its role in a portfolio. Please note: at Best ETFs Australia we do not accept 'backtests' as a legitimate form of performance.
  • Funds under management (FUM) - Although some of the largest ETF providers have established marketing departments and distribution teams, and joint ventures between distribution experts and boutique fund managers are now more common, new funds often fail to get enough money invested into them in the first 1-3 years to make them very profitable for the issuer. One obvious reason for this is most funds management and ETF ratings agencies (like us), who provide the ratings on fund managers for financial advisers, demand a three-year track record. We will accept a shorter-term track record (i.e. under three years), but it must meet a range of criteria before we will consider it a worthwhile fund/ETF.
  • Buy-sell spread - The buy-sell spread, shown on our ETF listings page and in fund/ETF factsheet and quarterly reports, tells you how much it 'costs' to get your money in-and-out of a fund. Basically, it's an estimate of what it costs the fund manager to take your money and invest in whatever is inside the fund/ETF. Obviously, the lower/smaller the spread is the better it is for you. New ETFs/funds can have difficulty lowering the buy-sell spread to a reasonable level until they reach scale (e.g. having FUM more than $100 million).

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Cash – Australian sector

The Best ETFs Australian Fixed Interest sector includes ETFs, managed funds and index funds which cover Australian bonds ranging from Government treasuries to Corporate and Hybrids; right through to Cash Management Trusts (CMTs) and simple Term Deposit ETFs.

This sector may also include cash or bond products from foreign Governments or companies issuing their debt (bonds) or cash products here in Australia.

Performance Characteristics

Over the ultra-long-term, we expect the Australian bonds and cash sector to perform with low amounts of volatility (ups and downs) but equally low capital gains. Moreover, we believe investors should expect the income return produced by high-grade bonds and cash to remain low for the foreseeable future as inflation and Australian interest rates remain well below historical levels.

Don't Forget...

One of the unique features of the Australian term deposit market -- it's a legacy of our time during the Global Financial Crisis (GFC) of 2008/2009 --  is the Australian Government Guarantee on deposits.

Before buying a cash ETF, we think you should learn more about this relatively unique protection mechanism for Australians who deposit up to $250,000 in an approved bank. It may offer more security than buying a cash ETF. You can learn more about the Australian Government's deposit guarantee by clicking here.

We think you should consult a licensed, independent and trustworthy financial adviser if you need help understanding the guarantee.

What exactly does Cash – Australian invest in?

Z3RO invests in floating rates, corporate paper, cash and, typically speaking, other income-producing assets denominated in Australian dollars.

Sector risks

Australian cash ETFs provide investors with exposure to a pool of money that is typically invested in term deposits at major Australian banks and, occasionally, a small amount is invested in short term government bonds (often called 'enhanced cash' or 'cash plus' ETFs).

Here are some of the general risks (it's not a complete list):

  • No guarantees. Unlike some Australian traditional term deposits, cash ETFs do not entitle ETF investors to the $250,000 per person per ADI Australian Government deposit guarantee. You can learn more about the deposit guarantee here.
  • Concentration risks. Oftentimes, small or sub-scale cash ETFs invest all of the cash inside the ETF in just one or two banks. This lack of diversification could expose investors to the risk that their money is allocated to just one bank. We prefer to see the cash invested at multiple banks with high credit ratings and regulatory oversight.
  • Counterparty risks. It's important to check the Product Disclosure Statement (PDS) and any marketing documents on the ETF issuer's website to make sure you're comfortable with the types of banks, the regulatory oversight of those banks (e.g. APRA in Australia, various authorities in the US) and how your cash ETF is monitored.

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What you need to know about Pinnacle Investment Management

Pinnacle Investment Management is a Sydney-based investment firm which partners with small and boutique fund managers to help them grow their funds under management (FUM) through its established marketing and distribution network.

Pinnacle has so far partnered with popular fund managers in Antipodes, Hyperion, Plato and Resolution Capital.

Potential allocation for Z3RO

This ETF might 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?

A core-satellite approach puts investments into two 'buckets' depending on the expected risk and returns.

Bucket 1: Core Investments

The 'core' is the larger part of an investment portfolio and could be reserved for more conservative investments. For example, this might include diversified, low-cost and easy to understand funds, bonds, shares or ETFs.

If you're new to investing, the core is a good place to start.

Core ETFs might include:

  • Australian shares (index strategies)
  • Australian bonds and global bonds
  • Cash

Bucket 2: Satellite/Tactical Investments

The 'satellite' or tactical bucket is the smaller part of a portfolio (e.g. 0% to 30% of your entire portfolio). In this section, investors might decide to take more risk, invest in unique or unproven strategies, buy fast-growing individual shares, etc.

Tactical strategies could be higher risk, higher cost and more complicated strategies that are used in the hope of outperforming the averages (e.g. ASX 200, S&P 500, etc.).

Tactical ETFs might include:

  • Australian shares (rules-based strategies)
  • Global shares (rules-based strategies)
  • Commodity ETFs
  • Currency ETFs
  • Cash ETFs
  • Hedge funds

Typically, what is Z3RO used for?

The Z3RO ETF might be used by investors to get exposure to income-producing assets that are typically quite stable. Z3RO aims to invest in a way that generates a monthly income stream, via distributions, for its investors.

How do I invest in the aShares Dynamic Cash Fund (Managed Fund) ETF ETF?

The easiest way to buy an ETF is through your online share brokerage account. Just search for the ticker code and buy it. The following podcast explains how to buy shares and ETFs for the first time.

Meaning, you can follow the exact same process for ETFs as you do for shares -- both can be purchased in one account.

Australian Investing 101

Don't have a brokerage account for ETFs?

Read our tutorial on understanding how share brokerage accounts work.

Is Z3RO a good ETF?

We believe that knowing whether or not to invest in an ETF requires a lot of research, even for an ETF like this one. ETFs are long-term investments, so it's important to do the right amount of research into the ETF before you invest, and consider how it fits with your risk profile, strategy and the other investments in your portfolio.

Where you can go to find more research on this ETF:

Reports like this one on the Best ETFs Australia website were built to help you understand ETFs and to provide free access to news and research across all Australian ETFs, index funds and selected managed funds.

This report is the free version of our ETF reserach and it contains general information and should not be considered as a recommendation or personal financial advice. If you want to receive personal financial advice and have someone tailor the ETF research to you, you should speak to a financial adviser.

If you don't want to pay a financial adviser, here's what you can do:

  • Before doing anything, you should always read the ETF's Product Disclosure Statement (PDS), which should be available on the ETF provider/issuer's website. The PDS explains some of the risks, the fees and other important information.

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Disclaimer: Any information contained in this report is limited to general financial advice/information only. The information should not be relied upon because it has not taken into account your specific needs, goals or objectives. Please, consult with a licenced and trusted financial adviser before acting on the information. Past performance is no guarantee of future performance. Nothing in this article should be considered a guarantee. Investing is risky and can result in capital loss. By reading this website, you acknowledge this warning, having read our Financial Services Guide (FSG) and agree to our terms & conditions available here. This article is authorised by Owen Raszkiewicz of The Rask Group Pty Ltd.

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