Investment Professionals

Five lessons on gold from the pandemic

Mar 31, 2021

Lesson #1. Gold does well in crises, acting like portfolio insurance Every investor wants an asset that offers downside protection, or insurance of a sort. And preferably one that is not suspiciously complicated or synthetic. Perhaps the major lesson from the coronavirus is that gold can provide this type of insurance as gold historically does well during collapsing equity markets, as the chart below illustrates. Gold has performed well in times of crisis Source: Bloomberg, ETF Securities, 1 March 2021 The onset of the coronavirus crisis is generally dated from 31 December 2019, when the virus was first officially reported by Wuhan health authorities in China. The worst of things for markets ended on 18 November 2020, when Pfizer and BioNTech published phase 3 trial results for their vaccine candidate (suggesting that a mass vaccination drive was possible.) Throughout this period, gold provided a return of 25%, compared to the 9% delivered by the S&P 500 in US dollars. Nothing comes for free of course. And gold can underperform during strong equity market bull runs; such as the dotcom boom of the 1990s. However, this is often the way with insurance policies: when times are good, they fall in price, leaving investors mulling over whether they need them at all. Yet when bad times return, as they inevitably do, policy holders can be glad that they kept them. Lesson #2. Gold has outperformed most asset classes long-term The market is a noisy place. And getting caught up in the daily sound, it is easy to lose sight of the long-term picture. For gold, there are two ways of looking at the big picture. First, its long-term returns. Second, the impact that a small allocation can have on a portfolio. The pandemic has highlighted both benefits gold can bring. Average annual return of key assets in Australian dollars'* Source: World Gold Council (*Returns from 31 December 2000 to 31 December 2020. In Australian dollars of total return indices for S&P/ASX 200, Bloomberg Aus Bond Bank Bill Index, Bloomberg AusBond Govt 1+ Yr Index, and Bloomberg Commodity Index.) The long-term performance of gold is something that can surprise investors, as received wisdom suggests that Aussie equities outperform other assets over the long term. However, for the two decades leading up to January 2021, gold has been the top performing of the major asset classes. Gold’s outperformance was accentuated by the pandemic, as the ASX 200 is yet to re-achieve its pre-pandemic peak. Gold’s ability to enhance portfolio’s risk-adjusted returns was also on display. As gold maintains a low correlation with shares and bonds, it can improve the overall returns of a portfolio. (“Push out the efficient frontier” in the jargon). This can be seen below, with some simulations we have run with Vanguard’s famous LifeStrategy funds. It can be seen that the portfolio with a small gold holding does better on almost every measure. Investors are welcome to try their own simulations, with a small allocation to gold. Growth of $10,000: Vanguard LifeStrategy Simulation Source: Bloomberg, ETF Securities, Vanguard. Time period: 1/10/2005-30/9/2020 Lesson #3. The gold price is driven by negative real yields The gold price correlates with the real yield on the 10-year US treasury, the pandemic has shown. Meaning investors who want a signal on the gold price’s future direction potentially have one. It makes sense that gold would correlate with real yields. As gold provides no income, it can become more appealing when bonds do not have a real income either. And when bonds provide a negative income – meaning bonds are mathematically guaranteed to lose value if held to maturity – it is logical to expect gold to be more appealing still. Negative real yields are made of gold Source: Federal Reserve; ETF Securities, 1 March 2021 Aiding golds tether to real yields has been the rise of ETFs, which have allowed more flexibility about how gold is used in portfolios. Prior to 2006, gold did not correlate with real yields. The correlation only emerged after the mainstreaming of gold ETFs in the early and mid-2000s. That gold ETFs should have this influence has caused some to raise an alarm. Campbell Harvey, professor of international business at Duke University, argues that gold ETFs driving the gold market could create larger drawdowns in the price of gold. He wrote: “The ETF financialization of gold ownership, in which the real price of gold may be correlated with the amount of gold held by gold-owning ETFs, could possibly lead to higher peaks and lower troughs for the real price of gold relative to the experience of the past.” From where we sit, the evidence suggests that the opposite is at least equally possible. Drawdowns in the gold price were larger in the 1980s and 1990s – prior to gold ETFs. What is more, it is hard to see how gold is different from some pockets of the bond market, such as local government bonds, where demand for ETFs can also set prices. This was in evidence in the March 2020 where bond ETFs provided price discovery on untradeable municipal bonds. Gold: Maximum Drawdowns Source: Bloomberg; ETF Securities, 1 March 2021 Nonetheless, if gold ETFs are part of the reason that gold follow real yields, and gold ETFs are also here to stay – then it follows that the relationship should be robust. And for investors wanting clues on the gold price: watch real yields on the 10 year. Lesson #4. Bitcoin is not the new gold Gold and bitcoin are sometimes lumped together – given their apparently limited supply and potential use as alternative currencies. Some analysts have taken the inverse flows between gold and bitcoin ETFs the past several months – gold has seen outflows at the same time bitcoin has seen inflows – as evidence of gold investors migrating to bitcoin. However, gold and bitcoin are very different, as the pandemic has shown. Past two years Volatility % of weekly returns lower than -2.5% 95% VaR per US$10,000 Bitcoin 9.9% 26.9% $1,382 Nasdaq 3.2% 8.7% $382 S&P500 3.3% 8.7% $306 Gold 2.2% 7.7% $291 Source: World Gold Council; ETF Securities, 1 March 2021 The most obvious difference has been their volatility—which hit fresh extremes in 2020. Gold for its part was far less volatile than equities throughout the most volatile trading days in February and March. As panic selling peaked, our gold ETF traded sideways, not sustaining any loss of value. The ASX 200, as measured by an ETF, fell quite significantly. So too, did the MSCI World. But bitcoin was another matter entirely. It dropped more than 50% in the panic in US dollar terms—in keeping with its reputation as a highly volatile asset. Bitcoin and gold behaved very differently. Gold was a safe haven during coronavirus panic Source: Coindesk; Bloomberg; ETF Securities, 1 March 2021 The second is that the sources for demand for gold are very different. Bitcoin’s use case is quite narrow, with most end demand coming from speculators. By contrast, most demand for gold comes from central banks and industry, according to the World Gold Council. Investment makes up a significant fraction of demand, but still a minority. This then feeds back into volatility: more diverse demand ensures that gold is, again, less volatile. Lesson #5. Tactically trading gold has risks While the gold price has crept steadily upwards over the past 50 years, the precious metal has had periods of sustained drawdowns. This cyclicality might suggest that gold should be traded tactically. In this way, some of the downtrend can be missed. However, the lesson from our own gold ETF throughout the pandemic is that tactical gold trading has risks. From 17 August 2018 – 6 August 2020 GOLD produced a return of 76% for those who stayed fully invested. But for those who missed the best 10 days in that two-year period, the return GOLD produced was just 29%. The consequences of missing the best days are not unique to gold. Burton Malkiel, Princeton professor and author of best seller A Random Walk Down Wall St, notes the same thing occurs in the share market. He takes it as evidence in favour of buying and holding an index fund. He wrote: “Buy and hold investors in the US stock market made an average annual return of 8% during the 15 years from 1995 through 2009. But if they had missed the 30 best days in the market over that period, their return would have been negative.” To be sure, tactical trading may also help avoid the worst days, which can then produce a better return. But knowing whether tomorrow will be a best or worst day is impossible. As we all know, no-one has a crystal ball.

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Volatility in technology companies is increasing

Mar 29, 2021

Technology companies’ share prices have hit some turbulence. Thanks to rising interest rates, volatility in the tech sector is picking up. And as the Nasdaq-100 – a popular gauge used to follow the US tech sector – is retreating from its all-time pandemic-induced highs, investors are wondering how to profit from or protect against this influential sector. Nasdaq-100 up days and down days year-to-date Source: ETF Securities, (Dates: 1 Jan - 24 March 2021) Short and long Nasdaq 100 funds issued by ETF Securities offer one solution. In this article, we look at how they work and the benefits and risks they offer. What do short and long funds do? Long and short funds magnify the ups and downs of the Nasdaq-100. They are kind of like mirrors and magnifying glasses. ETFS Ultra Short Nasdaq 100 Hedge Fund (SNAS) ETFS Ultra Long Nasdaq 100 Hedge Fund (LNAS) The short fund, known by its ASX ticker SNAS, is like a mirror. It moves in the opposite magnified direction to the share market, rising in value when the Nasdaq falls, and falling when it rises. In this way, SNAS, like short selling, can provide a way to profit from or hedge against a falling share market. Performance of LNAS and SNAS since inception Source: Bloomberg, 25 March 2021 The long fund, or LNAS, is the magnifying glass. It follows the Nasdaq up and down – but to a magnified degree. In this way, LNAS gives investors a tool for expressing strong views on the movements of technology stocks. The graphs above and below illustrate what the results can look like. The graph above shows the performance of both funds since inception. As the Nasdaq 100 has strongly rallied the past year, LNAS, the long fund, has outperformed. The short fund by contrast has strongly underperformed over the same period. SNAS performed strongly when the Nasdaq fell Source: Bloomberg, 25 March 2021 However, over shorter periods the results can look very different, as the graphs above and below indicate. In times when the Nasdaq 100 falls, SNAS performs strongly. The first fortnight of September 2020 was one such period. By contrast, in periods where the Nasdaq falls, LNAS falls further. Late-February early-March this year was one such period. LNAS falls more than the Nasdaq during dips Source: Bloomberg, 25 March 2021 These funds have advantages over derivatives – like options and CFDs – in that they are more transparent and easier to trade. They are also potentially safer, as we discuss below. How do they work? Leveraged long and short funds use Nasdaq 100 index futures to achieve their aims. SNAS sells Nasdaq index futures. Whereas LNAS buys them. To magnify the ups and downs, these futures are traded “on margin”, by our trading desk. Our trading professionals monitor the exposure to the Nasdaq 100 to keep gearing within a set band of 200% to 275% of the fund’s net asset value. When gearing becomes too low, they increase the exposure to bring it back up. When gearing becomes too high, they reduce exposure to bring it back down. This means the actual degree of gearing varies day to day—but is always actively managed. The level of gearing can be viewed on our website every day. Crucially, all gearing is managed within the funds. This means that investors never face margin calls. It also means SNAS and LNAS can never cause investors to lose more money than they put in. This makes LNAS and SNAS different from – and potentially safer than – outright short selling and derivatives trading, where investors can face margin calls and losses of potentially more than their original investment. How are the prices determined? As the funds use futures, their prices follow the futures market. It is important to note that futures markets can move in different directions to the share market—especially for Australian investors. This tends to occur for two major reasons: time zone differences between Australia and the US; and the more flexible trading hours that the futures market allows. Unlike shares, futures are traded almost 24 hours a day six days a week. This can mean, for example, that even when the Nasdaq-100 index falls throughout the Chicago trading day, the Nasdaq-100 index futures held in our funds rise throughout the Sydney trading day. This could occur, for instance, because traders believe that the Nasdaq 100 will rise the following morning in Chicago. What are the risks? It is important that investors understand that LNAS and SNAS are not like index-tracking exchange traded funds (ETFs). Instead, they are actively managed hedge funds, and come with a higher degree of risk than ETFs. As leveraged short and long funds magnify both the profits and losses investors experience, they are only appropriate for short term trading and any holdings should be actively monitored. They should not be used as buy and hold investments.

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There is no dotcom bubble in tech stocks

Mar 24, 2021

For some years, commentators have been comparing the thundering run in technology stocks to the dotcom bubble of the 1990s. For the past three years, technology has outperformed all other sectors, as promising new technologies have captured investors' imaginations. But comparisons of the present day to the dotcom era are arguably misguided. And claims that technology stocks are in a dotcom-style bubble are most likely wrong. Today’s tech rally vs dotcom The first difference between the two eras is the strength of the tech rally. Simply put: the dotcom rally in technology stocks was far more powerful than today’s. Had you invested $1 into the S&P 500 Information Technology Index, the major gauge of US tech stocks in June 1997, it would have turned into $3.20 by March 2000—a whopping 320% return in just two and half years. Not dotcom - today's tech sector rally in perspective Source: Bloomberg, (Data from 1/1/1998 - 1/3/2000 and 26/11/2018 - 25/02/2021) Had you put $1 into the index in mid-2018, it would have turned into $1.99 by the end of February 2021—thanks largely to the coronavirus driving up the value of technology stocks. That is still a very handsome return of 99%. But it pales in comparison to the dotcom era. We see the same thing when we look at specific companies. Microsoft, Amazon and Apple were three of the major drivers of the dotcom boom. In the 1990s, the market judged them to be world-leading tech companies, with profits swelling well into the future (a correct conclusion, as things turned out). By all appearances, the market is making the same conclusion about these three companies today. Not dotcom - Microsoft, Amazon, Apple Market-weighted price return. Source: Bloomberg But again, we can see that the rally in these three sector-defining businesses has been weaker. And weaker despite Microsoft, Amazon and Apple being better businesses today – stronger profits, fewer competitors, more diversified – than they were in the 1990s. And despite interest rates being much lower today. We can also contrast the “darlings” of each era. In the dotcom era, Qualcomm, Cisco and Oracle were among the darlings. They were great businesses then; they are still great businesses now. Today, the “FANGs” – Facebook, Amazon (again), Netflix, Google – are said to be the companies of our time. But here again, the dotcom boom was very different. Qualcomm, Cisco and Oracle – and the rally they enjoyed – was of an order of magnitude greater than Facebook, Netflix and Google’s. In fact, Facebook and Google have underperformed the tech sector index over the past two and five years. It is hard to see any dotcom-style boom in these businesses today. Dotcom darlings versus the FANGs Source: Ycharts, (Market weighted price return. Dates from 2/6/1997 - 28/2/2000, and 4/6/2018 - 26/2/2021) Dotcom era lesson: valuations matter While it is hard to see a dotcom-style bubble in technology today, the lessons of that era still apply. The first is that when rallies are too strong, a correction can follow. The second more important lesson is valuations matter. During the late 1990s, the revenue and profits of tech companies were growing rapidly. In five years leading up to 2000, the earnings of Qualcomm, Oracle, Cisco, Intel, Microsoft and other tech leaders more than quadrupled. But investors got too optimistic. They projected these profits too far into the future. As the rally peaked in early 2000, Oracle, Cisco and Qualcomm were all on triple-digit price-to-earnings ratios and double-digit price-to-sales ratios. These valuations may have been justified on a very long-term outlook. (Qualcomm and Oracle went on to exceed their 2000 peaks). But they proved unsustainable in the following decade. June-99 Revenue (Quarterly YoY Growth) EPS Diluted (Quarterly YoY Growth) PE Ratio PS Ratio Amazon 171% Unprofitable Unprofitable 19 Cisco Systems Inc 45% 800% 119 21 Oracle Corp 22% 31% 41 6 Qualcomm Inc 15% 800% 223 6 Dec-20 Revenue (Quarterly YoY Growth) EPS Diluted (Quarterly YoY Growth) PE Ratio PS Ratio Facebook 33% 53% 27 9 Amazon 44% 118% 74 4 Netflix 22% -8% 89 10 Google 23% 46% 30 7 Source: Ycharts Today by contrast tech stocks are on far more modest valuations. Suggesting that many investors have taken the lesson about valuations to heart. And perhaps suggesting that investors can become suspicious these days when tech stocks rally strongly (which could also explain the headlines). Investing in technology today Any technology investor should exercise caution when making stock selections – especially after a long rally. Caution is something that we have built into our own tech ETF, which takes a different approach to garden a variety market-weighted ETFs. Our tech fund – ETFS Morningstar Global Technology ETF (ASX Code: TECH) – uses a valuation filter to exclude overvalued companies. When picking tech stocks Morningstar’s team of researchers, who control the index, remove companies that they believe are overvalued. They look at many valuation metrics, including price-to-earnings, price-to-sales and monitor them continuously. As such, stocks that are on dotcom-style 100+ PE ratios almost never make the cut. How technology companies fare as the global economy “reopens” from the coronavirus we will have to wait and see. But for now, at least, it seems the lessons have been learned and tech stocks are safe from a potential bubble.

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How to invest in the value rotation

Mar 18, 2021

Value investing, which involves buying beaten up and unloved stocks, has underperformed for years now. With central banks keeping interest rates low and global technology giants on a tear, growth stocks have thoroughly outperformed. But are things about to change? Steepening yield curve may mean a higher discount rate The yield curve has steepened sharply in recent months, as investors take stock of the coronavirus vaccine rollout and weigh fears that Biden’s stimulus package could trigger inflation. US yield curve has steepened Source: Bloomberg as at 7 April 2021 When interest rates rise, in theory at least, the way companies are valued changes. This is because when interest rates rise, the “discount rate” – which is the interest rate investors use to value companies’ future profits – also rises. The higher the discount rate, the more “a dollar today is worth more than a dollar tomorrow”. And the more a company’s share price should, in theory, reflect their profits today over their profits tomorrow.  Higher discount rates can be a good thing for value stocks. This is because their valuations tend to be more heavily determined by their near-term profits. And indeed, over the past six months as the curve has steepened, we have seen value stocks outperform. Value has outperformed growth in recent months Source: Bloomberg as at 7 April 2021 Value stocks love a vaccine Another potential signal of a value stock recovery may be vaccine rollouts. Value stocks tend to be concentrated in sectors hard hit by lockdowns; oil, utilities, travel and entertainment. And as such, according to Goldman Sachs, they have “the highest correlation to vaccine distribution probabilities.” Said more simply: the better chances of reaching herd immunity via a vaccine, the better the chances value stocks have of outperforming. The below chart from Goldman shows the sensitivity of value stocks to vaccine rollouts in the US. Value stocks have been more sensitive to vaccine news Correlation to 10pp increase in COVID-19 vaccine distribution probability Source: Goldman Sachs Global Investment Research and GSAM. As at January 31, 2021 Yield – a real value strategy There are many ways to define and access value stocks. But one common way is to use dividend ETFs. This is because they tend to have lower price-to-dividend, price-to-earnings and price-to-book ratios than the total market. After all, this is what allows them to sustain their higher dividend payouts. Here, ETFS S&P 500 High Yield Low Volatility ETF (ASX Code: ZYUS) offers a solution. How the fund works ZYUS invests in the 50 least volatile high yielding S&P 500 stocks. This means that the primary filter for the index is yield (initially ranking the 75 highest yielding stocks) and the secondary filter is volatility (removing the 25 most volatile of these). These rules result in a 50 stock portfolio that targets high yield and that has an embedded value tilt, which is particularly meaningful in the current market. 2021 outlook The heavy impact of COVID-19 on high yielding sectors and the oil crash took a large toll on ZYUS’s performance last year, along with the fund's heavy underweight to the top performing tech sector. As we start to see early signs of a rotation to value, in the last 6 months ZYUS has begun to outperform the S&P 500 Index. Whilst ZYUS’s performance significantly drags over 12 months, particularly due to the big tech underweight vs the S&P 500, if the rotation to value continues there’s potential for a continued recovery in ZYUS.

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2021 trends for your clients’ portfolios

Jan 25, 2021

Investing may look a bit different in 2021 as the year starts with cautious optimism and global vaccine rollouts. The investment winners in the year of the pandemic were technology companies, but what lies ahead this year for your clients? Portfolios will be guided by five trends this year: economic drivers such as recovery from COVID-19 and low global interest rates, along with trends like the movement to value, thematic investing and short & leveraged investing. Download the full whitepaper Global economic recovery from COVID-19 We now have approved vaccines being rolled out in the US and UK, along with planned pipelines for the rest of the globe, but investors shouldn’t assume an instant return to normal. It takes time to vaccinate a population and many countries are still battling severe outbreaks. Governments globally have announced generous stimulus packages to revive business activity. The European Union approved a coronavirus stimulus package to raise 750 billion euros1 after being hard-hit by the pandemic, particularly Italy and Spain in the later stages but countries like the Czech Republic struggling in later waves2. Investors can access European recovery through an ETF like ETFS EURO STOXX 50® ETF (ASX Code: ESTX). Beyond this, many countries are considering or resuming broadscale projects to further economic growth, with infrastructure one option for this. For example, India, initially subject to the world’s toughest lockdowns to manage COVID-19, has forged ahead with its existing US$1.4 trillion infrastructure program3. Investors can access activity in India through an ETF like ETFS Reliance India Nifty 50 ETF (ASX Code: NDIA). Low interest rates globally Interest rates declined further in 2020 to support global economies dealing with the pandemic. It is likely cash rates will remain low through most of 2021 to support recovery with the potential of increases late in the year. Low interest rates are typically supportive of business development and growth activities however have also placed pressure on yield-focused investors. Many have been forced to consider asset classes outside of fixed income to support their needs and this trend is likely to continue across the year. Some will take a ‘riskier’ approach to their yield investments and look for dividend-bearing assets, including equities. Investments in “safe-haven” commodities including gold and silver have a low opportunity cost and offer stability so are likely to continue to be popular across the year. Precious metals also typically perform well in periods of low interest rates, with investors using these, particularly gold, rather than cash as a store of value and to protect against inflation4. Investors can access gold on the ASX through the ETFS Physical Gold (ASX Code: GOLD). Movement to value investments Investors tend to move away from growth investments like technology in periods of economic recovery or growth. As news of vaccines hit markets in late 2020, investors started to shift towards value investments such as banks or industrials. This is likely to continue across 2021. The Australian sharemarket is strongly skewed towards financials and resources, which include companies typically falling into value investments so investors may look towards broad Australian exposures, slightly tailored cross-market exposures like ETFS S&P/ASX 300 High Yield Plus ETF (ASX Code: ZYAU) or sector exposures to refocus on value investments. Thematic investing Investors have been increasingly interested in the themes of the future in recent years and being able to invest according to their views and values. This trend is likely to continue in 2021. Dynamics in the coming year, such as vaccine rollout or renewed focus on climate change are likely to see biotechnology and climate change related investments appeal in 2021. Investors interested in healthcare may take a thematic or sub-sector approach such as healthcare biotechnology through funds such as the ETFS S&P Biotech ETF (ASX Code: CURE). Investors focused on climate change may consider the growing range of ETFs capturing sustainability, or alternatively consider battery technology which is key to the viability of renewable energy. ETFS Battery Tech & Lithium ETF (ASX Code: ACDC) is the only Australian-listed ETF to offer exposure to the global battery technology supply chain. Short & leveraged investments Across the volatility of 2020, many self-directed sophisticated investors took a short-term approach to trading and embraced short & leveraged funds. The popularity in the previous year suggests we may see the range available in Australia continue to expand to support interest in investing based on high conviction views. Find out more about the short & leveraged products offered by ETF Securities here. 1. EU leaders finally approve coronavirus stimulus package ( 2. How COVID-19 upended life in Europe throughout 2020 | Euronews 3. Source: India 2030: exploring the Future; National Infrastructure Pipeline 4. Gold investment demand remains well supported in 2021 – report - MINING.COM

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Why consider India for your clients’ portfolios

Dec 15, 2020

India’s star is on the rise and if you are considering an emerging markets exposure for your clients’ portfolios, it may be time to revisit India. Global challenges may just be a temporary setback for India, which is forging ahead with growth plans and many nations, including Australia, are seeking to forge closer trade partnerships. Like the broader Asian region is typically attractive to investors in emerging markets, India also benefits from the growth case of a well-documented growing middle-class and economic prospects. Recovering from the global pandemic The COVID-19 pandemic has been significant globally, not just from a health perspective but also economically. India was initially hard-hit, implementing one of the harshest and most extensive lockdowns globally1. Cases appear to have peaked in India in September and there are now signs of economic recovery as seen in indicators such as industrial output and energy consumption2. The Indian government has returned its efforts to the future growth of the nation, with key emphasis on its existing plans for infrastructure. Three key growth drivers A large and diverse nation, both in population and in region, India’s future is dominated by three key growth drivers. Infrastructure investment The Indian government has committed to US$1.4tr infrastructure investment by 20253. There is also a strong focus on climate and renewables, with the Ministry of Petroleum & Natural Gas announcing in September 2020 that it aims to operate 50% of fuel stations using solar power within five years4. India has also partnered with Japan via the India-Japan Coordination Forum for Development of Northeast for projects in India’s Northeast states5. Infrastructure can be an important tool for economic growth as it offers short term benefits such as employment, and longer term benefits in the form of useful water management, ports and roads to improve access and lifestyle for a population as well as businesses. Reform and fiscal policies India has historically been complicated for business operations, but government reforms have assisted in opening the country to internal and foreign business investment. The Indian government has also recently passed updated labour codes to simplify laws and compliance processes as well as incorporating a social security fund for gig and platform workers6. These reforms are anticipated to support continued ease of doing business in India. The country is also expected to benefit from accommodative monetary policy supporting business investment, along with fiscal spending programs to assist in reducing poverty. Consumption India is expected to benefit from a growing middle-class across Asia and the accompanying economic rise in consumption. It is expected to see the percentage of households in poverty drop from 15% to 5% by 20307. This creates an opportunity across industries to target a growing audience of people able to afford more than just the basics and demand better quality goods and services. While international brands are targeting this space, India’s own listed companies have physical and cultural advantages in reaching this audience. How to incorporate India in your clients’ portfolios Financial advisers could consider India from a few perspectives. Regional diversification within the core international investments of a portfolio. A tilt towards thematic investments, in this case, the trend for the growth of the middle-class across Asia, within the satellite portion of a portfolio. A growth allocation within either core or satellite portions of a portfolio. Options for investing Direct investment in Indian companies (noting that the Indian market can be difficult to access) Direct investment in companies with business operations in India which are listed in Australia or internationally. Actively or passively managed funds that focus on Asia, themes relevant to Asia or India, or specifically focus on India. ETFS-NAM India Nifty 50 ETF (ASX code: NDIA) is the only fund in Australia that offers exposure to the Indian economy via its benchmark index, the NSE Nifty50 Index. NDIA includes exposure to the 50 largest and most liquid companies listed on the National Stock Exchange of India (NSE) and represents more than 60% of the market capitalisation of India. For more information on investing in India or ETFS-NAM India Nifty 50 ETF (ASX code: NDIA), please speak to ETF Securities. 1 2 3 Source: India 2030: exploring the Future; National Infrastructure Pipeline 4 5 6 7

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