BetaShares, BDM Adviser Services, Blair Modica talks about the rapid adoption of ETFs in Australia, why a range of ETFs are becoming part of investors’ portfolios and what sectors to watch in 2019.
Jessica Amir: Hello I’m Jessica Amir for the Finance News Network. Today I’m with BetaShares Business Development Manager, Blair Modica. Hi Blair and thanks for coming.
Blair Modica: Hi Jessica, how are you?
Jessica Amir: Good thanks - thanks for coming to Melbourne.
Blair Modica: Thanks for having us.
Jessica Amir: First up, just a quick introduction to BetaShares?
Blair Modica: We’re Australia’s only founded and managed ETF provider. So we specialise in Exchange Traded Funds and we’ve got about 50 different funds in the marketplace, at the moment. We’re managing about $6 billion in terms of funds under management. We also have Australia’s largest dedicated team to financial advice and retail clients.
Jessica Amir: Before we talk about your ETFs in a little more detail. Maybe you can give us an introduction for those who aren’t familiar with the term?
Blair Modica: An Exchange Traded Fund or an ETF, as we like to call it, is much like a managed fund except that it‘s bought and sold on the Stock Exchange. Now there’s also some other added benefits like cost. We like to think of ETF as the cheapest entry point into the market. They’re also subject to the same rules and regulations, as stipulated by ASIC as a managed fund and they’re really easy to access. You can jump online, use your online broker or platform to buy the product, and it’s basically a one-click transaction.
Jessica Amir: Zooming out, looking at the industry as a whole. How big is the market here in Australia and overseas?
Blair Modica: We’ll start with overseas first; it’s a $5 trillion industry overseas. And Australia accounts for about $40 billion worth of that. So it’s interesting, I think ETFs came around in 1990 globally, but then came about in Australia in 2001. So they are really here to stay and the long-term growth is really exciting. Worldwide I think we’re growing at 18 per cent and in Australia, it’s actually 41 per cent annually. So we’re seeing a large uptick in ETFs and it’s certainly exciting to be a part of.
Jessica Amir: Thanks Blair, now let’s talk about your ETFs. What do your ETFs cover?
Blair Modica: We cover a wide range of different asset classes. So we really like to pride ourselves on the fact we can offer anyone, any type of market exposure. Whether it’s Australian equities, international equities, cash and fixed income, currency or commodity type trades, we’ll be able to provide something.
Jessica Amir: How are you finding the ETFs are being used?
Blair Modica: We see ETFs used in a lot of different ways. One popular way is a core satellite approach, so using a broad based type equity exposure. Say an A200 to form that core part of your portfolio, and then creating spokes or satellites that might be more tactical in nature. So for example they might want to take a currency play on the US dollar or the Euro, or they might want to take a thematic type approach whether it's through global banks or global pharmaceuticals.
Jessica Amir: Where are you finding investors move with their feet and invest the most?
Blair Modica: In times of insecurity we’ve seen a lot of, I suppose, interest in fixed income and cash. So whether that’s through a floating rate note bond fund, or AAA cash, that’s been of some interest. But also technology’s been really popular over the past year. So a trade like NASDAQ, where you’re getting the top 100 stocks on the NASDAQ index, or something like a Robotics index. RBTZ is the one we provide and that gives you exposure to robotics and AI, throughout the world. For example, a company like NVIDIA, which is an artificial intelligence company that’s doing some really interesting things, in the United States.
Jessica Amir: One of the major selling points for an ETF is its low cost. So how do they really compare when stacked up to other funds, and what does this mean for investors long-term?
Blair Modica: I think we see ETFs compared a lot to managed funds, and a really good example is our A200 investment. At seven basis points, it’s the lowest cost Australian exposure in the world. And when you compare that to a managed fund, let’s say 1.5 to two per cent, quickly you can see the difference in price. Now this has, I suppose, a material gain to the investor at the end of the day, in terms of price.
Jessica Amir: Lastly Blair. What’s your final message today?
Blair Modica: We feel that ETFs have a really important part to play in a well-diversified portfolio. Customers really find that cost is an important consideration and ETFs are certainly able to provide that. BetaShares looks forward to being able to provide cost effective solutions into the future.
Jessica Amir: Blair Modica, thank you so much for your time.
Blair Modica: Thank you.