BetaShares shakes up the diversified ETF market
Australian exchange-traded fund manager BetaShares will launch a new range of diversified ETFs, competing directly with Vanguard's product suite.
Mentioned: Vanguard Diversified Balanced ETF (VDBA), Vanguard Diversified Conservative ETF (VDCO), Vanguard Diversified Growth ETF (VDGR), Vanguard Diversified High Growth ETF (VDHG), BetaShares Australia 200 ETF (A200), iShares Core S&P/ASX 200 ETF (IOZ), Vanguard Australian Shares ETF (VAS)
Australian exchange-traded fund manager BetaShares will launch a new range of diversified ETFs, competing directly with Vanguard's product suite.
The new products will to cater to four risk profiles - Conservative Income, Balanced, Growth and High Growth – and expose investors to a portfolio of asset classes, including growth assets Australian shares, international shares and property securities, and defensive assets such as bonds and cash:
- BetaShares Diversified High Growth ETF (DHHF) – 90/10 growth/defensive
- BetaShares Diversified Growth ETF (DGGF) – 70/30 growth/defensive
- BetaShares Diversified Balanced ETF (DBBF) – 50/50 growth/defensive
- BetaShares Diversified Conservative Income ETF (DZZF) – 25/75 growth/defensive
BetaShares chief executive Alex Vynokur (pictured) said the firm was excited to offer investors access to a diversified investment portfolio in a single trade.
"It’s widely agreed that asset allocation is a major contributing factor to investment returns, yet it is one of the most challenging decisions an investor faces, and one that requires ongoing attention," he said.
“We wanted to bring a solution to the ASX which would allow investors - regardless of age, experience or wealth - the ability to access a robustly constructed portfolio that simplifies the asset allocation process.”
Related article: Investing basics: what is an ETF?
BetaShares follows in the footsteps of rival Vanguard Australia who launched their own set of diversified ETFs on the ASX in November 2017. Vanguard similarly brought four risk-based multi-asset products to market:
- Vanguard Diversified High Growth ETF (VDHG) – 90/10 growth/defensive
- Vanguard Diversified Growth ETF (VDGR) – 70/30 growth/defensive
- Vanguard Diversified Balanced ETF (VDBA) – 50/50 growth/defensive
- Vanguard Diversified Conservative ETF (VDCO) – 30/70 growth/defensive
Conservative is the only product where BetaShares differs from Vanguard in growth/income allocation.
All four Vanguard products have secured four Morningstar Gold ratings, with analyst Donna Lopata describing them as an "exceptional suite of listed multisector strategies".
"What makes this series of diversified strategies so appealing is its low cost and sensible portfolio construction. Vanguard is a leading index provider and this diversified range offers efficient exposure to underlying its constituents across sectors."
Vanguard's multi-asset products invest directly in Vanguard's wider product suite. For example, VDHG invests in Vanguard's shares and bonds index products:
- Vanguard Australian Shares Index Fund (Wholesale)
- Vanguard International Shares Index Fund (Wholesale)
- Vanguard International Shares Index Fund (Hedged) - AUD Class (Wholesale)
- Vanguard International Small Companies Index Fund (Wholesale)
- Vanguard Emerging Markets Shares Index Fund (Wholesale)
- Vanguard Global Aggregate Bond Index Fund (Hedged)
- Vanguard Australian Fixed Interest Index Fund (Wholesale)
Source: Vanguard Fact Sheet, October 2019
BetaShares say they will follow a similar path, obtaining asset-class exposure from their ETF product suite. However, they say they'll also use other ETF managers, including ETFs that trade in Australia and on overseas exchanges. BetaShares has confirmed that at present, there are no active ETFs in the portfolios.
Vanguard's four products have proved popular with investors, steadily growing assets under management to over $650 million. Today, VDHG is the most popular among the four multisector strategy ETFs with $241 million under management, followed by VDBA ($191.8m) and VDGR ($184.8m).
BetaShares predict their ETFs will be used by a wide range of investors including beginner and experienced investors, SMSFs and financial advisers.
"We have many enquiries from younger investors who don’t know where to start, parents who are seeking a solution that is simple to use and low cost so they can start investing for their children, and more sophisticated self-managed super fund investors who are looking for a low-cost solution for the core of their portfolios”, Vynokur said.
Vanguard Diversified ETFs, Quarterly Total Net Assets, inception to 09/2019
Source: Morningstar Direct
BetaShares gets the edge on fees
BetaShares will charge fees of 0.26 per cent for their product suite, one basis point lower than Vanguard's fee of 0.27 per cent.
This is not the first time BetaShares has gone into battle with other providers on fees. In May last year, BetaShares launched the BetaShares Australia 200 ETF (ASX: A200) to compete with Vanguard Australian share ETF (ASX: VAS), which at the time charged 0.14 per cent, and iShares Core S&P/ASX 200 ETF (ASX: IOZ) with fees of 0.15 per cent.
Fee history, cheapest Australian shares ETFs on the ASX, 2018-19
Source: Morningstar
A200 raised $500 million in funds under management in only 11 months, making it the fastest ever Australian ETF to reach this milestone, according to the firm. Flows into A200 have grown since, and today net assets sit at $778 million.
BetaShares A200 Net Asset Growth - inception to 26 November 2019
Source: Bloomberg, BetaShares
"Rival exchange-traded funds were already cheap, but BetaShares has taken cost to a new low, charging less than half the price of the nearest rival," former Morningstar associate director, manager research Alexander Prineas said at the time, adding that this action shows shrewd disruptors can unseat the international behemoths.
Since then, both providers have dropped their fees, Vanguard to 0.10 per cent and iShares to 0.09 per cent.
The product disclosure statement for BetaShares Diversified ETFs is expected to be available next month. The product launch remains subject to final regulatory approval.