In the US, ETFs represent about 16% of the entire managed fund space, but in Australia, it is only 1.5%. With many strategies available including Active ETFs, the growth outlook is strong.
Some investors buy LICs at a discount in the hope of extra gain when the discount is removed, but it might never happen. There’s a way of judging the discount relative to its historic norms.
All vehicles come with pros and cons versus alternatives, and Active ETFs have a wide range of appealing characteristics in which Australia has led the world. Many more Active ETFs will be launched.
ETFs reached over $40 billion by the end of 2018, with international equities ranked first for net flows, and a rapid growth in fixed income products. Cap-weighted indexes dominated but smart beta is gaining ground.
It was a big year for Listed Investment Companies (LICs) and Exchange Traded Funds (ETFs), both finishing 2018 with about $40 billion on issue and vying for top spot on the ASX. Here are some 2019 expectations.
As ETFs and LICs compete for market share, there’s enough interest in listed investments for both to prosper, and product innovation in ETFs shows no sign of slowing. Where will the growth come from in 2019?
Most portfolios will benefit from a mix of passive and active strategies, as there are market conditions where one might do better than the other. ETFs now cover a wide range of structures, not only indexing.
ETFs have grown rapidly in popularity and diversity, but like managed funds, not all products will survive for the long term and there are consequences if a small-scale ETF is closed by its issuer.
This exclusive early access to IIR’s Monthly Report includes the latest recommendations on global LICs, and a summary of the Active ETFs listed on the ASX. There’s now a lot of choice in global listed funds.
A recent global survey revealed a lack of trust in investment firms. There are many areas for improvement such as disclosure, transparency, and conflicts of interest, and different LIC structures are examples.
It’s important to consider why a LIC is trading at a discount, as what might appear good value worth buying may be built into the price for many years, and the discount may even worsen.
Active ETFs have many similarities with actively-managed funds, but the key differences are due to investing via an exchange versus a platform. Investors now have another option to consider.
LICs can sustain their dividends not only from current year profits, but from reserves built up in prior years. This report looks at reserve levels as a sign of consistency of future dividends.
Labor’s proposed franking credit policy has already faced a number of unintended consequences, and the inequitable tax treatment of Listed Investment Companies much also be addressed.