Exchange-traded fund (ETF) provider BetaShares has released a new market offering specifically to service SMSF investors and retirees looking for an income stream solution through share dividends.
BetaShares managing director Alex Vynokur said the strategy used by the Australian Dividend Harvester Fund sought to maximise exposure to large-cap dividend-paying Australian shares, aimed at delivering a tax-effective monthly income stream at least double the annual income yield of the Australian share market.
The ETF, trading on the Australian Securities Exchange (ASX) under the code HVST, employs a risk management strategy commonly used by institutional managers designed to defend the portfolio against the risk of significant losses by reducing the volatility of equity investment returns.
Vynokur said HVST was launched to satisfy rising demand from SMSF members and retirees for investments that will provide a strong income stream and provide a level of capital growth to assist with longevity risk mitigation.
“If they invest too cautiously, they may run out of money too early, while if they are too aggressive, they risk exposure to significant losses in a market decline, which could dramatically affect the quality of life in retirement,” Vynokur said.
“The fund provides investors the opportunity to earn high levels of franked dividends, which can boost the overall income return significantly, particularly for investors on lower tax rates, such as SMSF investors, or tax-exempt investors, such as those in the pension stage.
The risk management strategy employed by the Harvester Fund is being run in conjunction with global risk manager Milliman and involves daily monitoring of equity market volatility that can lead to selling ASX SPI 200 futures to reduce the portfolio’s risk.
Milliman said the risk management strategy aimed to provide most of the upside in rising markets while avoiding most of the downside in periods of decline over market cycles.
“HVST provides investors with access to a risk management strategy commonly used by institutional managers in a cost effective and simple way,” Vynokur explained.
“We believe that HVST will become a key investment tool for advisers looking after SMSFs and retiree clients when planning for the investment challenges ahead.”