Exchange-traded fund (ETF) manager VanEck has released a managed fund on the Australian Securities Exchange (ASX) providing individuals with a new avenue to access its flagship domestic equities strategy.
The VanEck Geared Australian Equal Weight Fund (Hedge Fund) will trade under the GMVW ticker on the ASX and will combine client capital with a gearing component in order to invest in the VanEck Australian Equal Weight ETF (ASX: MVW).
The borrowing component will be the entire responsibility of the fund manager, meaning investors will not have any need to engage complicated and costly gearing instruments such as margin loans or contracts for difference. The gearing ratio employed will be between 45 per cent and 60 per cent.
The underlying ETF investment for the listed managed fund is designed to avoid a concentrated allocation to a small number of companies included in the S&P/ASX 200 Index. In particular, the ETF is looking to avoid a heavy weighting to the top 10 companies in the index, seeing this make up has not significantly changed over the past decade.
According to VanEck, the MVW offers three times the diversification of the S&P/ASX 200 through its equal weighting approach to the underlying portfolio and has outperformed the index by 1.21 per cent a year since its introduction to the market in 2014.
“GMVW is in response to significant adviser and investor demand and represents a game-changing opportunity for ASX investors in a ‘higher for longer’ interest rate environment. Furthermore, with many market participants questioning valuations of some of Australia’s largest companies, an equal weighting approach to Australian equities is a prudent alternative,” VanEck chief executive Arian Neiron said.
“GMVW will give investors the opportunity to significantly enhance their returns. The return potential, in both directions, is amplified by gearing with no personal recourse for investors.”
The new offering will incorporate 76 stocks and includes a yearly management fee of 0.35 per cent. It will distribute dividends on a semi-annual basis.
