Related links
Exchange Traded Funds (ETFs) - like an ASX listed managed fund
For detailed information on ETFs, please visit ASX ETF website.
Also known as Listed Managed Investments (LMIs), ETFs are a great way to gain broad exposure to sectors of the market as well as high growth foreign markets such as China.
OneTrade clients can invest in ETFs through their Trading Account.
What are ETFs?
According to ASX, ETFs invest in a portfolio of securities, which may include Australian shares, international shares, fixed income securities, listed property trusts, or a combination of asset classes.
ETFs are open-ended funds, meaning they issue new units, or cancel units, as investors move into and out of the fund, allowing them to maintain on-market prices that correlate closely with the value of the underlying portfolio.
Prices therefore are determined by the value of the assets the ETF holds rather than by other factors such as investor sentiment.
ETFs can be classified as either indexed or actively managed.
The ASX ETF market is divided into 2 types of ETF:
» Indexed ETFs, and
» Actively Managed ETFs
Below is some information provided by ASX as featured on www.asx.com.au.
Indexed ETFs
Indexed ETFs (sometimes referred to as Classical ETFs) typically offer low management fees, since they have a low operating cost structure. There are a number of factors that contribute to the low cost structure, including:
» The fund manager does not need to deal with high levels of administration, as investors wanting to
buy or sell units can only do so on ASX.
» Typically tracking a share market index , which minimises the turnover of underlying shares in the
portfolio. In addition, once the target investment portfolio is established, there is no ongoing need for
the ETF manager to undertake research, since the portfolio composition is determined by the index.
Actively Managed ETFs
Actively managed ETFs provide access to a much broader range of investment management styles, strategies, asset classes and operational practices than indexed ETFs.
Additionally, actively managed ETFs can usually accept cash applications, which means investors can buy units directly from the fund manager through lodging an application form contained in the fund prospectus as well as being able to buy units already issued on ASX.
