Commodity ETFs in need of education boost

Commodities are currently underused in Australian investor portfolios, including SMSFs, highlighting the need for greater education on the asset class, particularly in an exchange-traded fund (ETF) structure, according to ANZ ETFS.

“From an investment point of view Australia is a massive outlier in the pure lack of use of commodities in investment portfolios,” ANZ ETFS head Kris Walesby told selfmanagedsuper.

“It’s a country of commodities so perhaps it’s too close to home, but I think the underlying [reason] is that there’s just a lack of education about what commodities can do in portfolios.

“True commodities wrapped in the ETF form are very underused.

“What’s clear to me, when we’re mainly speaking to advisers here but sometimes even end investors, is that they’ve never been shown why it should be included, so it comes down to education.”

Walesby said in the United States investor knowledge of commodities as an asset class was quite high due to the education efforts occurring there.

“The education is being truly done [to the point where] you get to a completely different level where their questions are about implementation, how they can trade it better and how they can get a better price on exchange – much more technical than in Australia,” he said.

“So most issuers have worked out or know intuitively that the chances of an adviser or investor buying your ETF are heightened if they understand why they would.

“Education will likely result in some, if not a lot, funds under management gathering for all the issuers who are in this particular area of commodities, as well as across the board for ETFs.”

Currently, the industry was only providing simplistic commodities education to investors and SMSFs, he said.

“We accept that other issuers are doing that level of education, but for us it’s all about application,” he said.

“How do you play gold or precious metals within an SMSF?

“We want to show you what this gold ETF would look like in a portfolio so that you can see why it makes a difference.”

He revealed ANZ ETFS’s strategy for commodities ETF education would be a key focus for the rest of the year.

“We’re currently trying to change the content so we’re working hard to use the best of what ANZ and ETF Securities have, in terms of education used for their client bases, to bring all the best parts of that to the SMSF and advisory community to make it more understandable, realistic, friendly, not scary and really informative,” he explained.

“You’ll start to see the beginnings of that very shortly and it will be a continuous development and roll out from there.

“And as we get some level of uptake from that, as a consequence, it will roll out to specific events where we can talk to those who are showing interest and speak to them about how to use it in a portfolio.

“So we have a very specific strategy for that.”

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