Betashares is set to launch two exchange-traded funds (ETF) as part of a new product range that will be the first to offer a moderate level of gearing on the Australian Securities Exchange (ASX).
The fund manager said the new Wealth Builder range would be launched with the release of the Betashares Wealth Builder Australia 200 Geared (30-40% LVR) Complex ETF (ASX code: G200) and Betashares Wealth Builder Diversified All Growth Geared (30-40% LVR) Complex ETF (ASX code: GHHF) later this month.
As the names imply, both funds will use a gearing ratio generally between 30 per cent and 40 per cent on a given day and will be internally geared, with Betashares stating this “means each fund enters into the borrowing arrangement itself, which ensures that investor risk is limited to the capital invested, with no possibility of margin calls for investors”.
“Due to the structure of the funds, investors benefit from institutional interest rates that Betashares is able to access, which are typically significantly lower than those available to individual investors seeking to borrow in their own capacity,” it said.
The G200 fund will provide moderately geared exposure to the returns of the broad Australian share market, while the GHHF fund will provide moderately geared exposure to the returns of an ‘all-cap, all-world’ share portfolio.
The new funds will carry a fee of 0.35 per cent a year of the fund’s gross asset value, with Betashares stating they were suitable for accumulator investors with long investment timeframes looking to use a dollar-cost averaging investment strategy.
Betashares chief executive Alex Vynokur said: “Utilising gearing is a well-established approach to building long-term wealth, but it has traditionally been expensive to access or used in funds that are only suitable for investors with a tolerance for higher gearing levels.
“The Wealth Builder series has been designed for investors who are comfortable with leverage, but are seeking a more moderate level of gearing better suited to a ‘buy and hold’ investment strategy as part of their wealth accumulation goals.”
