Betashares has launched Australia’s first exchange-traded fund (ETF) for those seeking to use the momentum style of investing in Australian equities.
The Betashares Australian Momentum ETF, carrying the Australian Securities Exchange (ASX) code MTUM, tracks the Solactive Australia Momentum Select Index. This rules-based index prioritises stocks with strong and consistent momentum, while quickly removing the worst performers.
The index ranks 200 of the largest stocks on the ASX by their six and 12-month risk-adjusted returns and selects the top 50 stocks based on those rankings at each selection day. This selection process is repeated every two months.
Any stock that is ranked in the lowest 10 per cent based on its six-month total return at the latest selection day is removed from the final portfolio.
The ETF will charge a management fee of 35 basis points and the fund’s current holdings include Wesfarmers, commercial property giant Goodman Group, mining company Rio Tinto and Australia’s largest banks.
Betashares chief executive Alex Vynokur noted MTUM will provide investors with an avenue to implement momentum-style investing, which is difficult for individuals due to the effort involved.
“As a strategy, momentum investing is appealing to a broad range of investors given its performance potential, but it is often difficult to implement due to factors like the time required to manage such a strategy, the identification of outperforming stocks, behavioural bias and execution costs,” Vynokur noted.
“It’s our view that a systematic, rules-based index approach to momentum investing can assist investors in efficiently accessing the unique return profile of this style factor.
“The Betashares Australian Momentum ETF combines the performance potential of momentum investing with the convenience of an ETF. MTUM is a complementary addition to our growing range of innovative investment solutions that assist investors and their financial advisers in implementing institutional-grade strategies within their portfolios.”
According to the fund manager, MTUM’s index has outperformed the Standard and Poor’s/ASX 200 Index by 2.8 per cent a year from its inception in May 2011 to June 2024.
MTUM is now available on the ASX and follows the release of a hedged ETF by Betashares last week.
