ETF NEWS - ULTUMUS

Betashares ETF Factory

Written by Ultumus | 21 August 2018

Australia

BetaShares lists six new international ETFs

BetaShares is listing a suite of new international ETFs that bring the global equity market closer to Australia.


  • BetaShares Asia Technology Tigers ETF (ASIA)
  • BetaShares Global Blockchain Innovators ETF (BLOK)
  • BetaShares Global Robotics and Artificial Intelligence ETF (RBTZ)
  • BetaShares Global Income Leaders ETF
  • BetaShares Global Quality Leaders ETF
  • BetaShares Global 200 ETF

ASIA will track a Solactive index made of 50 large and mega caps in the Asian tech sector, with a particular focus on ecommerce. The fund is open to investing in companies from any Asian company outside Japan. But in order to qualify in the index, companies must be listed in either Hong Kong, Singapore, Taiwan or the US. This listing requirement means the fund is overweight Chinese stocks and if you use the Chinese government’s definition of China which includes Taiwan and Hong Kong (and feel free not to use the PRC’s definition) the product is almost entirely Chinese.

BLOK offers an Australian version of the $113 million Reality Shares’ NexGen Economy ETF, tracking the same index. The index is actively managed, essentially, by Reality Shares’ investment committee. As there are no pure-play publicly listed blockchain companies in existence, the index looks for companies that are developing, researching or using blockchain tech. The fund has a 60% tech sector tilt.

RBTZ will jump on board the global craze for robotics and AI focussed ETFs (we’ve counted more than 10 listed in 2018). From what we can tell, RBTZ is an Australia version of the Global X Robotics & Artificial Intelligence ETF (BOTZ), which is also owned by Mirae Asset. (BetaShares is majority owned by Mirae). It will compete with ETF Securities’ ROBO, which tracks the famous ROBO Global Index.

The Global 200 ETF is a plain vanilla ETF that will track the 200 largest companies in the world via a Solactive index. From what we understand, it is BetaShares intention to underprice Vanguard and BlackRock and compete with the big two in Australia’s plain vanilla space.

Global Income Leaders will offer an income-tilted global portfolio and attempt to cash in on Australians’ lust for dividends. (For those unversed on this Australian peculiarity, see this article). The fund will pick 100 developed market stocks based on how big their yield is, while also screening for volatility and earnings. It will track a Nasdaq index, bearing the name of the fund.

The Global Quality ETF will look for companies with fat profits, low debt, and free cash flow – the standard metrics of quality. In order to achieve this, the fund will pick companies based on four fundamentals: ROE, debt-to-capital, FCF and business stability. It will do this via the iSTOXX MUTB Global Quality Index. The product will compete with VanEck’s World ex Australia Quality ETF (QUAL).

Analysis – BetaShares’ product factory

Anywhere in the world, the big three issuers – State Street, BlackRock, Vanguard – make for tough opponents to displace. But in Australia, BetaShares has managed to knock over State Street and muscle its way to third-biggest ETF provider. How has BetaShares managed to beat State Street? Largely because it runs a formidable product factory.

Most ETF issuers are loathe to roll the dice on new products. For some, the cost is too great (listing a new ETF typically costs around $200k). For others, there are reputational risks if the product fails to hit breakeven assets and is forced to close (breakeven assets for an ETF is typically around $50m, depending on fees). For others, rolling out lots of products doesn't mesh with their brand.

But BetaShares is always happy to list new products and has most listings of any Aussie issuer by far. BetaShares' willingness to take the risk on new listings is a large part of their success. In our estimation, these new funds will have cost over $1m to get to market. And in order to breakeven they’ll need to collectively bag about $300m in assets. That BetaShares is willing to take this risk and make this investment largely explains their success.

Of the new listings, my favourite is the blockchain ETF. While the robotics and quality leaders ETFs look like copycat products, the blockchain fund is a genuinely new offering and adds colour to the Aussie ETF market.