Individual Investors

ETFs versus LICs – which is best for my portfolio?

Aug 06, 2020

Finder.com investments editor Kylie Purcell explains the differences between ETFs and LICs. Exchange traded funds (ETFs) and listed investment companies (LICs) are both popular investment options within Australia. Although they share a number of similarities, there are also important differences to consider as an investor. We’ll look at some of the main differences between the pair to help you decide which is best for your portfolio. What is an ETF? An ETF is a type of investment fund that trades on a stock exchange – similarly to regular shares. ETFs invest in a basket of assets, such as stocks, commodities and bonds. ETFs will often track a particular market index such as the S&P/ASX 200. Rather than trying to outperform this index, these “passive” ETFs aim to closely mimic the index performance. This means your returns will rise and fall in line with the tracked index. What is a LIC? A LIC is a publicly listed company (hence the name, listed investment company) that operates like a managed fund. Like an ETF, LICs may invest in a variety of assets, including stocks, property and bonds. The main similarity is that both ETFs and LICs allow you to invest in a diversified portfolio. This may include a single asset class, such as stocks or bonds, or it could hold multiple assets. You also invest in a LIC in much the same way as an ETF – over a stock exchange. Unlike ETFs, LICs issue a fixed number of shares that investors can buy or sell on the stock market (usually the ASX). This means that the price of a LIC is partly determined by demand from investors and may not always be liquid. In some scenarios, an investor might be forced to sell their LIC shares at an undesirable price if there aren’t enough buyers in the market. On the other hand, ETFs are known as ‘open-ended’ investments, meaning the number of ETF units in circulation is not fixed. Instead, units can be issued and removed based on demand. This means that supply and demand have less of an impact on ETF prices than the underlying portfolio itself. What are the main differences between the ETFs and LICs? Structure A LIC is structured as a company, so if you decide to invest in a LIC, you’ll own shares in the LIC itself, rather than the underlying assets. An ETF, on the other hand, is a unit trust, which means you’ll receive units in the fund if you decide to invest. Strategy ETFs typically offer exposure to an entire market, region or market sector such as global health or technology stocks. They have the potential to track hundreds or even thousands of stocks. Although not always the case, most ETFs are passive investment products, meaning they either track an index or use filters to decide which stocks are included in the fund. LICs, on the other hand, actively select each individual asset to invest in. The LIC will have an investment team responsible for choosing and managing the company’s investments. Tax obligations Because an ETF is a unit trust, all tax obligations are passed on to investors. Any dividends and franking credits are passed directly to unitholders. With a LIC, all dividends are paid to the company and it’s at the discretion of management whether to pass on that income or reinvest the money back into the fund. If the LIC receives unfranked dividends from the underlying investments, it will typically pay tax on those dividends at the company tax rate and deliver franked dividends to shareholders. Cost ETFs are relatively cheap because they aim to track an index rather than outperform it. LICs tend to cost more because they have investment managers deciding which assets to invest in. If the manager outperforms the benchmark, this may result in additional fees. Both ETFs and LICs are an affordable way to invest in a wide asset pool. Management fees are generally lower than traditional managed funds (although these can differ depending on whether the fund is passively or actively managed). Both investment options offer high liquidity and provide access to a diverse range of assets in a single trade. Purchasing ETFs or LICs – or both – can be advantageous, but it’s important to understand how your money will be invested beforehand. One of the biggest factors for most investors is how aligned prices are with the underlying assets, i.e. the net asset value (NAV). Because ETFs have an open-ended structure, the price of the ETF will trade very closely to the NAV. So if the value of the stocks held by the ETF rise, the price of the ETF will rise with it. This is not always the case with LICs. They may trade at a premium (above) or discount (below) NAV, depending on how many buyers and sellers are trading LIC shares. So if stocks held by the LIC go up, but investors still aren’t willing to buy, its share price may not rise. More information about Finder. For information about ETF Securities range of products, please contact us or visit our product pages. Client Services Trading Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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How to invest in 5G

Aug 05, 2020

5G is anticipated to transform the world, bringing new efficiencies and opportunities to how we live and work. For investors interested in incorporating this growth theme within their portfolios, the options are broader than simply telecommunications companies. What is 5G? Fifth generation wireless (5G) is a technology infrastructure system allowing communications and data access on-the-go, much in the same way that previous generations including the currently used 4G offered. It is anticipated to transform the ‘internet of things’ and become the force for the fourth industrial revolution. The fourth industrial revolution refers to how cyber physical systems are expected to drive the next era of industrial reform and change, bringing new efficiencies and opportunities to how we live and work1. Wireless networks are integrated into our lives and 5G sees that dependency increase further in the immediate future. It is already here in its early stages. While 5G was coming anyway, the COVID pandemic may see some companies accelerate their plans to access 5G-enabled technology, particularly automation, both as a safeguard against future lockdowns or simply to allow them to continue basic operations in the current environment2. How to invest in 5G There are a range of options to consider for investors keen to incorporate 5G within their investments. Three options are listed below. Broad investments across sectors given all companies will need to use 5G in some form at some stage, be it to conduct business operations or as part of their services. Sector investments such as via telecommunications companies which will be building the infrastructure to support 5G. Thematic investments covering the 5G supply chain. The supply chain extends from underlying technology suppliers and producers to companies creating technology and software for automation, robotics and artificial intelligence which will advance substantially from the use of 5G. Interested in accessing 5G exposure by using robotics, automation and artificial intelligence? Find out more about ETFS ROBO Global Robotics and Automation ETF (ASX code: ROBO) or contact us. Client Services Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au [1] https://www.hitechnectar.com/blogs/fourth-industrial-revolution-5g-future/ {2} https://insights.roboglobal.com/as-the-covid-19-storm-rages-on-3-waves-of-growth-are-on-the-horizon

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How robotics and AI are transforming supply chains

Jul 06, 2020

The COVID-19 crisis has shed a light on how fragile supply chains can be, with essentials from toilet paper to milk vanishing from shelves. The solution could be robotics, automation and AI according to a new paper from ROBO Global, the index provider behind ETFS ROBO Global Robotics and Automation ETF (ASX code: ROBO). Read the article The current pandemic has demonstrated how heavily existing supply chains rely on a human labour force. While many companies, such as Coles, already had plans to incorporate automation, it is likely that the current situation will accelerate this trend. There are five key areas where robotics, automation and AI are likely to transform supply chains. Automated warehouse solutions High flying robots, such as from Verity, can assist with access and inspection of inventory at warehouses allowing for taller warehouses and increasing safety for the human workforce. Warehouse picking and packing Picking and packing is highly labour intensive. Using robots has been a game-changer for companies like Amazon and Walmart. Online grocers Online orders for groceries substantially increased during COVID-19 lockdowns and the convenience may see the interest continue. Companies like Ocado, with sophisticated warehouse technology and robotics, are selling their technology to other partners like Coles. Micro-fulfilment Think curbside pick-up of orders, but facilitated by automated technology. Prepared food delivery Restaurants have struggled to keep up with food delivery demand during lockdown periods so ‘ghost kitchens’ designed just for food prepared solely for delivery may assist. Restaurants have struggled to keep up with food delivery demand during lockdown periods so ‘ghost kitchens’ designed just for food prepared solely for delivery may assist. For more information on investing in robotics, automation and AI, contact us using the details below. Sales Trading Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: capitalmarkets@etfsecurities.com.au

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Three reasons to invest in the vaccines of tomorrow

Jun 24, 2020

Technology is not just transforming the way we work and live, it is also saving lives and changing how we treat diseases. The biotechnology industry may be appealing from a social and moral perspective, but it is also trending for future growth. Download the full article What is biotechnology? Biotechnology is a sub-industry of the healthcare sector and specifically refers to technologies that use biological processes, capturing companies that focus on research, development, manufacturing and/or marketing of products based on biological and genetic information. The different types of biotechnology include biological drugs, vaccines, immunotherapy, gene therapy, orphan drugs and genetic engineering. This industry has hit the headlines during the COVID-19 pandemic, with companies like Moderna and Gilead part of the race to find effective vaccines and treatments. Why consider investing in global biotechnology? A growth industry backed by demand from an increasing population (and the trend of an aging population) a. Biotechnology is predicted to be valued at more than US$729bn by 2025, compared to US$295bn today[1]. b. The industry will benefit from increased spending in healthcare. The US, for example, is expected to average 5.4% annual increases in national health spending through to 2028[2]. Diversification in your portfolio a. Biotechnology in the US is valued at approximately 14.2x the Australian industry[3]. b. Biotechnology can be lucrative but is also high risk, so spreading internationally across a number of companies can assist in managing these risks. The chance to invest in something ‘bigger’, incorporating social themes into your portfolio a. The opportunity to be a backer for more efficient future health treatments, a social good with the potential to generate growth. How to invest in biotechnology? You could consider direct shares or managed options. Direct shares may be a riskier option due to the high failure rates of drug testing and long periods of development. Managed options such as ETFS S&P Biotech ETF (ASX code: CURE) may offer broader exposure across a number of companies. For more information about investing in biotechnology, click here or contact us using the details below. Investor Relations Institutional Trades Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: capitalmarkets@etfsecurities.com.au [1] https://www.gminsights.com/industry-analysis/biotechnology-market [2] https://www.healthleadersmedia.com/finance/national-health-spending-growth-projected-54-annually-through-2028 [3] https://www.ibisworld.com/au/industry/biotechnology/1901/

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Powering the future: investing in battery technology

Jun 10, 2020

Renewable energy is a growing sector that is set to overtake fossil fuel energy in the future. Investors interested in this area should consider battery technology and storage, an area that is essential for the growth of renewables. A growing market: why battery technology? The value chain for battery technology ranges from mining companies, mining for metals like lithium, to manufacturers of battery storage and storage technology providers. All are potential beneficiaries of the anticipated growth in this industry. Lithium ion batteries have transformed the battery industry and accounts for 85% of commissioned, utility scale battery storage worldwide[1]. By 2022, utility scale battery energy storage capacity is expected to more than double, while the market for battery technology is anticipated to reach $90bn by 2025, growing more than 12%[2][3]. This growth is due to growing demand and increasing affordability of renewable energy like wind and solar power, along with the transition towards electric cars. Renewable energy in particular is an intermittent source and thus, dependent on reliable storage systems to ensure ongoing power. The Telsa-built Hornsdale Power Reserve in South Australia is a large-scale example of battery storage in play. How to invest in battery technology? Investors can access battery technology exposure in a range of ways. Focusing on value chain component companies such as mining companies or battery manufacturers. Considering broader established companies with some exposure to battery technology. Managed options, either active or via ETFs like ETFS Battery Tech & Lithium ETF (ASX code: ACDC). For more information about ETFS Battery Tech & Lithium ETF (ASX code: ACDC) or investing in battery technology, please contact us on 02 8311 3488 or infoAU@etfsecurities.com.au

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Investing to meet your financial goals

May 13, 2020

Whether your goal is to build a house deposit, pay for education or create a retirement income, taking a measured approach to your investments can help. Most investors typically need to be able to preserve a certain level of capital, while also investing for long term growth or income. An enhanced core-satellite approach to building your investment portfolio can help you target your goals and manage market movements. Download the complete paper or read a summary below. What is enhanced core-satellite investing? Enhanced core-satellite investing is a two-pronged approach to portfolio construction, where the core is made up of passive exposures to major asset classes (mainly equities and fixed income) and the satellite investments are more opportunistic and designed to seek specific growth outcomes, sometimes at higher levels of risk. Satellite investments could be targeted ETFs, actively managed funds or investments in individual companies or real estate. Generally, the core might be 65-85% of the portfolio, depending on the investor’s goals, investment horizon and risk tolerance, while satellites tend to represent 15-35%[1]. Assisting you with your goals This approach can assist investors in meeting their goals because it allows the main component to focus on long term growth and stability and use the satellite component to take on investing opportunities which may carry greater opportunity of returns alongside greater risk of loss to help meet specific goals. Interested in finding out how this approach has worked during the COVID-19 pandemic? Read more How this might look is as follows. An investor might use an ETF like ETFS S&P/ASX 300 High Yield Plus ETF (ASX code: ZYAU) to represent the Australian equities exposure in the core of their portfolio. They might then choose to incorporate a growth theme like robotics and artificial intelligence in their satellite portion by using an ETF like ETFS ROBO Global Robotics and Automation ETF (ASX code: ROBO). Using ETFs in the investment portfolio can be beneficial due to characteristics like liquidity (allowing investors to be flexible based on needs or market conditions), low costs along with flexibility and variety. With a wide range available on the ASX, investors are more likely to find an ETF to meet specific goals or match particular views. For more information on enhanced core-satellite portfolio construction or to find out more about using our range of ETFs in your portfolio, speak to ETF Securities.

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Three investment ideas for COVID-19

May 13, 2020

Investing has become a game of chicken in the eyes of some investors. Has COVID-19 become a buying opportunity? Have we seen the bottom, or is the worst yet to come? It’s hard to make any solid predictions in this unfamiliar territory – investment markets have experienced a health crisis rather than being undone by poor fundamentals, such as in the global financial crisis. Those investors looking for ideas could consider the following. Download the complete paper or read the summary below 1. The essentials Some sectors are largely able to continue normal operations, even in crisis situations. Humans still need basic supplies and services to live, meaning that consumer staples continue to see demand, while infrastructure such as energy suppliers or telecommunications continue to need to operate. In the current situation, telecommunications have been particularly essential with much of the population needing to work from home. Investors could look at an ETF like ETFS Global Core Infrastructure ETF (ASX code: CORE) to access global infrastructure. 2. Defensive assets Uncertain times can make for volatile markets. Some investors may seek to include defensive assets which may be less correlated to equity market performance, such as precious metals like gold or silver. Gold in particular has been used as a safe haven asset in the past for its low and at times negative correlation to other asset classes. Investors can access precious metals through ETFs like ETFS Physical Gold (ASX code: GOLD) or ETFS Physical Silver (ASX code: ETPMAG). 3. Long-term megatrends Those investors looking beyond the current activity could consider megatrends, some of which have accelerated during the pandemic. Trends such as ecommerce or online entertainment, falling under the megatrend for virtual connectivity and digitisation, have experienced spikes as citizens in lockdown have become attuned to their availability and convenience. Investors seeking companies which focus on this theme can consider an ETF like ETFS FANG+ ETF (ASX code: FANG) which includes companies like Amazon and Netflix. Biotechnology may be a longer-term trend but it is also particularly topical at the moment in the hunt for vaccines and a cure for COVID-19. The ETFS S&P Biotech ETF (ASX code: CURE) accesses this trend and offers exposure to some of the key players currently working against the virus, including Gilead, Regeneron and Moderna.

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Four ways to manage market volatility

Apr 02, 2020

From the current COVID-19 situation to the future, markets will always face periods of uncertainty and volatility. A measured approach to investment management can assist with supporting your investment portfolio in these periods. In this paper, we discuss four common approaches. Download now Market volatility refers to the magnitude of upward and downward movements in asset prices over a period of time. A company whose stock price moves up and down by 1% daily is considered less volatile than one with 5% daily moves. Investors tend to think of volatility in terms of downward market movements, as we are currently seeing, but it can equally relate to the pace of rising markets. Approaches to managing volatility 1. Diversification Different assets, regions and sectors may react differently to market events and perform better in certain market conditions. For example, travel and tourism are struggling in the current situation while supermarkets are thriving. For this reason, spreading your money across a range of investments can help balance your exposure to volatility experienced in different areas. 2. Incorporating more stable, less cyclical investments Some investments may not offer high growth but tend to be consistent across a range of markets. For example, essential services infrastructure is needed regardless of market conditions so can continue to offer stable performance in times of volatility. 3. Alternative investments Some investors seek out investments which specifically perform differently to share and bond markets. The aim of this strategy is to help neutralise any negative outcomes experienced in share and bond investments. One asset used in this way is gold which typically has a low or negative correlation with other asset classes. 4. Strategic tilts For certain investors, incorporating short-term investments during market volatility might be part of their strategy. This might mean temporarily adding defensive investments to help protect their portfolio or it might mean seeking out high growth (riskier) investments if they believe there may be opportunities from an eventual market recovery. ETFs can be an effective tool for investors in periods of market volatility. They can assist by offering broad exposure and instant diversification in a liquid and cost-effective manner. The wide range of specialised ETFs available on today’s stock exchanges also offer investors choice and flexibility in how to adapt to changing market conditions. Beyond these measures, it’s worthwhile stepping back to consider the what, why and how of your investments rather than simply following the crowds. It can also help to speak to a financial professional about your strategy and options. For more information on the solutions ETF Securities offers, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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Three megatrends and how to invest

Mar 09, 2020

To access the white paper, please click the download now button above. Investors considering growth in the portfolio may find megatrends offer an alternative and sustainable long-term approach. So, what are megatrends and how can you invest in them? Megatrends are universal socioeconomic, environmental or technological forces that change the way we do things . These trends tend to be sustained over longer periods, in some cases, 20 years or more and based on known patterns and pressures . Investing in megatrends has become increasingly accessible in recent times. A range of ETFs have appeared in the market to target specific trends and incorporate a wide range of companies in that area. Three examples of megatrends follow. 1. Virtual connectivity and digitisation The internet is becoming faster and cheaper to access, with close to 60% of the world’s population already users . There are a range of opportunities following from the movement online, such as ecommerce or online entertainment and gaming. Even data storage and security are becoming major concerns. Access to this megatrend can be broadly through sectors like technology that service and fuel this trend, regions with companies dominating this trend, such as the US or across Asia, or via niche subthemes like robotics and artificial intelligence. 2. The growth of the Asian middle-class Two-thirds of the world’s middle-class population are expected to reside across Asia by 2030 and this offers potential for a range of industries, such as luxury goods, tourism, education and healthcare. Many global players have turned their focus to targeting consumers in this region, while regionally based companies like Alibaba or Infosys Ltd are well positioned for future growth. Investors can consider sectors like healthcare which will benefit from the growth or take a more concentrated approach by investing across Asia or within specific countries, like India. 3. Limited resources Ongoing population growth and climate change are placing pressure on available resources including minerals, energy, water and food sources. This has forced an evolution in terms of new products, how we consume and how companies interact with us. Renewable energy and battery storage is one area tipped to grow off the back of this megatrend. Many larger corporations have also started to adjust their operations too, for example, Amazon CEO Jeff Bezos pledged $10bn to fight climate change through the Bezos Earth Fund . Investors may consider sub-themes like battery technology or electric cars, or they could consider industries which may experience higher demand on the basis of restricted resources like agriculture. For more information on the solutions ETF Securities offers, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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The three key drivers of Indian performance in 2019

Mar 03, 2020

The Indian market disappointed investors in 2019, with three key drivers behind its performance. These included the non-banking financial companies (NBFC) crisis, the Indian election and India/Pakistan conflict. Despite this, the prospects for 2020 and beyond remain positive. Read the full article here. The drivers of performance Global markets were influenced by a range of events including the US/China trade war, slowing growth and recession fears in 2019. Alongside these concerns, the Indian economy was affected by a range of domestic issues, with three drivers of particular significance. 1. NBFC crisis NBFCs offer similar services to banks but don’t hold a banking license. Some examples include equipment leasing companies or infrastructure financing. These companies have been responsible for much of the financial liquidity in India through short term borrowing from banks and mutual funds. In late 2018, an NBFC called Infrastructure Leasing & Finance Services (IL & FS) defaulted on multiple loans and covenants across India. Banks and mutual funds stopped lending to NBFCs as a result, and this caused a liquidity and confidence issue across India. The crisis continued across the early parts of 2019. 2. Government election Narendra Modi returned to power in the India election, which offers ongoing political stability. However, it is common in the lead-up to an election for incumbent governments to focus more on re-election than policy implementation and 2019 was no exception to this. 3. India/Pakistan conflict Hostilities between India and Pakistan escalated in 2019, with the volatility subsequently felt in the economy. The outlook for 2020 The Indian government and Reserve Bank of India (RBI) implemented two key measures to manage the economic challenges of 2019. These included five rate cuts and a corporate tax cut to increase confidence, investment and liquidity. These are expected to support the economy for some time to come. In addition, the Indian economy is likely to continue to benefit from factors like low inflation, ongoing political and economic reform and low stable crude oil prices. Like the broader Asian region, India should also continue to experience a growing middle-class and in turn, increasing consumption spending patterns that accompany this. You can access India through the ETFS Reliance India Nifty 50 ETF (ASX Code: NDIA). For more information on the solutions ETF Securities offers, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: sales@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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Three ways to manage a retirement portfolio

Feb 11, 2020

To access the 'No retirement for investments' white paper, please click the download now button above. Important notice: a previous version of this whitepaper incorrectly stated the ASFA comfortable retirement standards for a couple as $43,787/year and superannuation balance of $545,000. These figures relate to the comfortable retirement standards of a single not a couple. The standards for a couple are $61,786/year and $640,000 in superannuation balance. The duelling forces of retirement It is normal for retired investors to need to manage their portfolios for a stable income, a level of growth and capital protection, but current market conditions are making this particularly challenging. Faced with globally low interest rates on one hand as a threat to their income, and market volatility from geopolitics like corona virus and tensions in Iran affecting growth assets, how should retired investors manage their portfolios? ETF Securities recommends three options summarised below: product selection, income diversification and portfolio construction. You can read the full paper by downloading above. 1. Product Selection In retirement, investors need to be conscious of the quality, flexibility and costs of the products they use for their investments. One product type investors may consider are ETFs which hold characteristics such as lower costs compared to active funds, typically high liquidity allowing investors greater flexibility and are easy to use with less administration compared to shares or bonds. 2. Income diversification Investors have traditionally looked to Australian fixed income for their key yield option. In the current environment, they should consider diversifying their income,such as looking at fixed income internationally where there may be higher yields available or through dividend streams. Dividend streams can be a riskier option, and where some retired investors may use high yield shares and offset the risks in other ways, others can look to options in more stable, less cyclical industries like infrastructure. 3. Portfolio construction Retired investors should consider the overall construction of their portfolios and ensure they are diversified across assets and regions for growth and income, after all, the portfolio still needs to grow and support the lifespan. One area retired investors may wish to look at incorporating as part of the overall construction is alternatives, in the form of commodities like gold which can assist with stability and diversification. For more information on the solutions ETF Securities offers, please speak to your financial adviser or contact us on: Sales Trading Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au

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2020 Trends in Robotics, AI, and Healthcare Innovation

Jan 28, 2020

This is an extract of the ROBO Global paper 2020 Trends in robotics and AI innovation. To access the ROBO Global white paper, please click the download now button above. Companies around the globe are revising and rethinking their strategies to cement their futures in a world that is dictated by robotics, automation, and AI (RAAI). Deep learning, 5G, and computer vision are among the trends to watch in 2020 and beyond. 1. Computer vision Computer vision is the technology that gives computers and machines the sense of sight and the ability to analyse and understand the content of digital images. It is increasingly used throughout the manufacturing process to enhance product quality, reduce waste, and improve productivity in a variety of endmarkets, including consumer electronics, automotive, pharmaceuticals, and many more. 3D vision, a type of computer vision which has long been prohibitively expensive and complex, is set to accelerate with the help of Isra Vision in manufacturing, Koh Young in semiconductor and electronics inspection, and FARO and Hexagon in metrology and surveying. Computer vision is also enabling collaborative robotics and advanced driver assistance. Ambarella, the video processing technology provider, is rapidly morphing into an AI computer vision company. The company has received design wins for its CV chip in the professional security camera market and is engaged in several use cases in the automotive market. 2. Deep learning A subfield of machine learning, deep learning uses algorithms that strive to mimic the deep neural networks of the human brain. Reinforcement learning (RL), an aspect of deep learning, refers to goal-oriented algorithms that are the key to enabling autonomous robots, improving personalization, and accelerating drug discovery. RL will be used to dramatically improve the personalization of news and other content—a shift that will transform the massive data sets available to the advertising industry into practical, usable information— and to revolutionize myriad processes that can be simulated, including fraud detection and credit loan processes in the banking industry. 3. 5G The fifth generation of mobile wireless communications—5G—boasts features that have the potential to supercharge everything from business processes to how we engage with the Internet. Once it is fully deployed, 5G is expected to deliver up to 100x faster connection times than 4G and is expected to enable download speeds of 500-1500 Mbps in a matter of seconds. Major carriers are expected to roll out some type of 5G services in late 2020 and into 2021. Consumers will soon be able to choose 5G-compatible mobile devices from leaders like Apple, Samsung and Xiaomi, powered by Qualcomm’s latest 5G Mobile Platform Snapdragon. This best-in-class RF System provides peak speeds that promise to surpass most wired connections and transform the mobile experience. The Internet of Things (IoT) currently includes about 30 billion devices. The power of 5G will be more crucial than ever as this figure accelerates thanks to investments in autonomous vehicles, smart cities, smart factories, big data, and AI. ETFS ROBO Global Robotics & Automation ETF (ROBO) helps investors capture these trends across robotics, automation and enabling technologies. Find out more about ROBO here. For more information on accessing these trends through ETFs for your clients, please speak to ETF Securities. Sales Trading Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: capitalmarkets@etfsecurities.com.au

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Top five ETF trends in 2020

Jan 24, 2020

To access the ETF Trends 2020 whitepaper, click here. The ETF landscape has expanded rapidly from the straight index replication of the past to more tailored offers covering themes, specific industries or sectors and even using alternative weighting. Advances in technology has allowed ETFs to become more sophisticated to meet with investor needs and demands. The value of the Australian ETF market is currently $A60.24bn[1] and is anticipated to continue to grow both in size and available options. Here are five trends likely to continue in 2020. 1. The search for yield Continued globally low interest rates means investors are seeking alternative sources of yield. Some are still looking at fixed income, but focusing on international options like the US, which has higher interest rate compared to its counterparts. Others are considering using equity dividend streams to help provide an income. Investors concerned about volatility risks for an equity approach might look towards infrastructure ETFs. The infrastructure sector includes many essential services areas like utilities, telecoms, industrials and transport which tend to be less vulnerable to market cycles and movements. Investments in gold tend to be popular with investors in times of low yield and market volatility. Holding appeal for both consumption purposes and investment, the performance of gold tends to have low correlation with other asset classes and tends to offer stability in times of market volatility. 2. Investing to offset Australian exposures Australian investments have been influenced over several years now by factors like slowdown in resources and residential property, along with a weaker Australian dollar. This has meant investors have needed to focus more on investing internationally to diversify the local risks and access growth and income opportunities. For example, investors are looking at particular growth themes like the middle class in Asia or at sectors not widely available in the Australian market, like technology. Currency ETFs are also becoming more popular, particularly those exposed to the US dollar which continues to be stronger than many developed nation currencies. 3. Thematic investing ETFs are becoming a cost-efficient and transparent way for investors to express their specific market opinions, growth themes, moral and ethical views or to target niche areas of growth. Concerned about UK post-Brexit? You might choose a European ETF which excludes UK companies. Passionate about new technology? A robotics or tech focused ETF might be for you. There is a movement towards ethical investing, with environmental investing a particular focus at the moment. As a quickly developing space with investor demand, there is likely to be continued growth in ETFs supporting this space, such as in alternative energy like battery technology. 4. Bespoke and smart beta strategies There has been a rise in ETFs using sophisticated rules or algorithms (smart beta) to ‘beat’ the market while still remaining passive. This might mean the exclusion of certain factors or using a different way of weighting investments compared to the index. For example, excluding companies in a particular industry. Or rather than weighting the investment based on company size, it might be weighted based on how volatile the companies are to market movements. Some ETFs like this are designed bespoke to large-scale institutions looking for both cost-efficiencies as well as the ability to match strategic or philosophical needs but still available to retail investors on the stock exchange. 5. Active ETF investing Active ETFs are an emerging area and typically track the strategies of active investment managers. ASIC lifted its suspension of new active ETFs in December 2019 and released new admission guidelines. Given international activity in this space as well, there is likely to be further growth in the available active ETFs in the Australian market. These may appeal to self-directed investors looking for active and liquid solutions with greater ease of use compared to many other active managed funds. For more information on accessing these trends through ETFs for your clients, please speak to ETF Securities. Sales Trading Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: primarymarkets@etfsecurities.com.au __________________________ [1] https://www.asx.com.au/documents/products/ASX_Investment_Products_November_2019.pdf

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