Nov 03, 2020
The value of gold is more than its spot price but also how it works in a portfolio. As an asset with multiple drivers determining its price, gold can seem mysterious, but the data suggests its role in client portfolios is clear. Gold’s investment value Gold can’t be valued using traditional metrics related to coupon or dividend value. While some institutions have created their own models, it can be more valuable to consider the interaction of gold with other assets in a portfolio. Gold is included in portfolios for a myriad of reasons – diversification, growth, as a hedge against inflation, and for a volatility safe-haven. These reasons are backed by the data. The below chart shows the correlation between gold and other asset classes which demonstrates why it is able to perform differently and even offer positive performance in volatile periods. Allocating to gold in a portfolio Gold allocations traditionally spread from 2-10% of a portfolio depending on risk tolerance and market conditions. For many investors, taking a flexible approach may be the answer, dialling up or down allocations based on individual client portfolio needs and market activity. For example, some financial advice firms, like Stockspot, have used a slightly higher allocation of 12% in recent times. Using an ETF like ETFS Physical Gold (ASX Code: GOLD) may be a suitable option for many portfolios as it offers a low-cost, liquid and easy to use exposure without the need for physical storage. Contact us to find out more about GOLD and using it in your portfolio. Client Services Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au
Nov 02, 2020
Investing in thematics is a newer concept but can expose your clients to some of the major socioeconomic, environmental and technological themes of our times. For many financial advisers, the question arises of how exactly to use such investments and allocate to them within a portfolio. What is thematic investing? Thematic portfolios follow a top-down approach to investing. They look at long-term macro trends, such as robotics and automation, and then use various screens and information sources to identify the companies or assets which support this trend through infrastructure or services. Themes should be: Universal rather than specific to just one company or region1. Sustainable over longer periods, in some cases 20 years or more. Based on known patterns and pressures2. Some examples of well documented themes include virtual connectivity, ecommerce, biotechnology, the growth of the middle-class in Asia and climate change. Access to thematic investments Typically, advisers might consider three different options for their clients. Direct shares in companies associated with a theme. Actively managed funds. Exchange traded funds (ETFs). Each carries different risks and benefits, along with varying fees, minimum investments, brokerage, tax implications and W-8 BEN forms in some instances. While still carrying investment risks such as market or liquidity risks, ETFs tend to be the lowest cost and most accessible option for investors given the potential for exposure to many companies and they usually cost less than actively managed options. How to allocate to thematic investments Thematic investments are versatile and can be used in a range of ways, such as: To complement the equities component in the core of a portfolio. As a tactical tilt in the satellite portion of a portfolio towards trends or for growth. As a diversification tool to broaden from typical assets in a portfolio core. The size of the allocation may vary depending on how the investor chooses to use it, ranging from 5-10% per investment depending on factors such as existing portfolio composition, risk tolerance, needs and goals. Thematic investments can help offer clients the chance to be an active participant in the major forces driving human progress. They can also be the opportunity for clients to incorporate their passions within their investments, or even to have the potential of holding the ‘next big thing’ in a more manageable format. The increasing availability of tailored thematic investments in the market means they are more accessible than ever for financial advisers to consider their suitability and fit for their clients’ needs, goals and portfolios. For more information on using thematic investments, please speak to ETF Securities. Client Services Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au 1 https://www.stockbasket.com/investmans-playbook/thematic-investment-ideas 2 https://publications.csiro.au/rpr/ws/v1/download?pid=csiro:EP126135&dsid=DS2
Sep 07, 2020
Sustainable and renewable energy has become a focus for a world increasingly conscious of the impact of fossil fuels. While the growth in renewable energy is exciting, have you ever thought about what it means for the broader supply chain? In this webinar, we discussed: The growth of renewable energy and the supply chain required to support it. The future of battery technology, and How to use ETFs to express your views and values. To watch the recording, please click here.
Aug 05, 2020
The story of 5G is more than just an added boost to your phone and home wifi, it could transform the way we live and do business. From this perspective, it may form part of your clients’ growth investments now and into the future. 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. 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 environment1. Verizon estimates that “by 2035, 5G will enable $12.3 trillion of global economic output and support 22 million jobs worldwide”2. How to incorporate 5G exposure into your clients’ portfolios? In a typical investment portfolio, clients are highly likely to have some exposure to 5G already, in the form of telecommunications companies or companies which manufacture phones and other IT systems. However, it may be valuable to consider the broader 5G supply chain for a more diversified exposure. It extends from underlying technology suppliers and producers, such as companies like Qualcomm or National Instruments creating specialised chips and semi-conductors used in devices to create access to 5G, to companies creating technology and software for industrial automation, robotics and artificial intelligence which will advance substantially from the use of 5G, like Ocado or Daifuku. Much of the supply chain is dominated by robotics, automation and AI companies which is where an ETF like ETFS ROBO Global Robotics and Automation ETF (ASX code: ROBO) can assist with exposure to the 5G transformation. For more information on investing in 5G and ETFS ROBO Global Robotics and Automation ETF (ASX: ROBO), please contact us. Client Services Trading Phone +61 2 8311 3488 Email: firstname.lastname@example.org Phone +61 2 8311 3483 Email: email@example.com  https://insights.roboglobal.com/as-the-covid-19-storm-rages-on-3-waves-of-growth-are-on-the-horizon  https://www.verizon.com/about/our-company/5G/how-5g-can-power-industrial-internet-things
Jul 06, 2020
The COVID-19 pandemic may be accelerating the trend towards using robotics, automation and artificial intelligence to enhance supply chains. Our dependence on human labour forces has been highlighted as we face scarcity of some basic grocery essentials during lockdown periods. ROBO Global, the index provider of ETFS ROBO Global Robotics and Automation ETF (ASX code: ROBO), discusses how robotics, automation and AI are transforming supply chains in a new paper. Read the article Many of the world’s largest companies are already focused on accessing robotics, automation and AI in their supply chains. Amazon is a well-known global example of this, using KIVA robots in their warehouses, while domestically, Coles is partnering with UK online grocer Ocado to use their software and technology for automation. Investors may be less aware of the companies supporting transformation and the specific areas of the supply chain they are set to disrupt. ROBO Global anticipate five key supply chain areas accelerating: Automated warehouse solutions assisting with inventory access and inspection. Warehouse picking and packing using robots to assist with social distancing as well as efficiency. Online grocers with automated fulfilment, warehouses and contactless delivery. Micro-fulfilment such as curbside pick-up for smaller retailers. Prepared food delivery using ‘ghost kitchens’ to maximise capacity of restaurants. For more information on investing in robotics, automation and AI, click here or contact us. Sales Trading Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: firstname.lastname@example.org
Jul 06, 2020
Recorded on the 2nd July 2020. In this webinar, we discussed: What biotechnology is and how it is different from broad healthcare Why investors should look outside Australia to the US How biotechnology is being used to fight COVID-19 What the future of biotechnology and healthcare look like Volatility and how to allocate to biotechnology in your portfolio To watch the webinar recording, please click here.
Jun 23, 2020
Biotechnology has hit the headlines during the COVID-19 pandemic as companies race for vaccines and treatments, but its growth prospects extend beyond this period. Australian investors may be well familiar with this industry, given the dominance of CSL, but may be missing exposure to the international market, in particular, the US, the global centre of biotechnology. Download the full article here 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. The US is typically viewed as the centre of global biotechnology due to the size of its market and the world-renowned US Food & Drug Association (FDA) approval process. The US industry is valued at US$113.bn, approximately 14.2x the size of the Australian biotechnology industry. Why use global biotechnology in your clients’ portfolios? A growth investment a. Biotechnology is predicted to be valued at more than US$729bn by 2025, compared to US$295bn today. 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. Diversification away from concentrated Australian industry a. Biotechnology can be a high-risk industry, as well as lucrative. Average development costs for developing a drug are estimated at more than US$2.1bn and processes can take 10 years or more for approvals – assuming the drugs are successful. Biotechnology performance has also benefited from highly active mergers and acquisitions (M&A) activity, expected to continue in the future. a. M&A for biotechnology was valued at US$23bn in 2019 with predictions of increased activity for 2020. How to invest in biotechnology? You can consider direct shares or managed options for your clients’ portfolios. 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: email@example.com  https://www.ibisworld.com/au/industry/biotechnology/1901/  https://www.gminsights.com/industry-analysis/biotechnology-market  https://www.healthleadersmedia.com/finance/national-health-spending-growth-projected-54-annually-through-2028  Deloitte Centre for Health Solutions, Unlocking R&D Productivity, 2018.  https://www.phrma.org/en/Advocacy/Research-Development/Clinical-Trials  https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/life-sciences/life-sciences-pdfs/ey-firepower-report-2020-how-will-deals-done-now-deliver-what-the-health-ecosystem-needs-next-v2.pdf
Jun 10, 2020
Battery technology investments could be the answer for clients with an interest in the environment and a desire to incorporate this within their portfolios. Renewable energy and electric cars are set to take over fossil fuels as a source of energy in coming decades, but to do so, battery technology and storage will be critical. Renewables and battery technology Renewable energy, namely solar and wind power, are intermittent power sources. To rely on these is to require reliable energy storage in the form of batteries. Likewise, electric cars are completely dependent on battery storage to operate. The South Australian Hornsdale Power Reserve is the largest example in the world of battery storage for renewable energy, making Australia one of the leaders (surprisingly, given our coal industry) in transformation. Wind and solar energy are forecast to supply around 48% of world electricity needs by 2050, with battery technology, gas peakers (turbines or engines that burn natural gas) and dynamic demand anticipated to drive market penetration of solar and wind by more than 80% according to BloombergNEF . To accommodate this growth, utility scale battery energy storage capacity is expected to more than double by 2022, while the market for battery technology is anticipated to reach $90bn by 2025, growing more than 12% . How to invest in 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. There are a range of ways to access battery technology in your clients’ portfolios. Direct shares in value chain component companies with the bulk of their revenue related to this area, such as mining companies like Pilbara Minerals or battery manufacturers. Direct shares in broader companies which still include exposure to battery technology, such as Panasonic. Managed funds, either active options or ETFs such as ETFS Battery Tech & Lithium ETF (ASX code: ACDC) which offer exposure across the industry. For more information about ETFS Battery Tech & Lithium ETF (ASX code: ACDC) or investing in battery technology for your clients, please contact us. Sales Trading Phone +61 2 8311 3488 Email: firstname.lastname@example.org Phone +61 2 8311 3483 Email: email@example.com This document is communicated by ETFS Management (AUS) Limited (Australian Financial Services Licence Number 466778) (“ETFS”). This document may not be reproduced, distributed or published  https://about.bnef.com/new-energy-outlook/  www.forbes.com/sites/mergermarket/2020/02/18/the-future-of-battery-energy-storage-is-upon-us/#d5b173d4a185/  www.mordorintelligence.com/industry-reports/global-battery-market-industry/
Jun 02, 2020
Recorded on the 27th May 2020. This webinar focuses on the alternative asset that is gold. In this webinar, we discussed: Gold's strategic and tactical place in a portfolio Understanding gold's valuation factors: The short, medium and long-term price drivers Examining the recent rise of gold The future outlook To watch the webinar recording, please click here.
May 18, 2020
Product in focus: ETFS Enhanced USD Cash ETF (ASX Code: ZUSD) Trading the greenback Many investors view cash as part of the defensive, and somewhat static portion of their portfolios, but in uncertain markets it might also be used as a trading tool to act on shorter term views and expectations of currency exchange rates. The US dollar is one such option that investors could consider, using an ETF like the ETFS Enhanced USD Cash ETF (ASX code: ZUSD). ZUSD aims to track the performance of an interest-bearing US dollar cash deposit by investing in US dollar bank deposits with maturities ranging from overnight to three months and earning a variable rate of interest. Using USD as a defensive position Cash typically forms part of a defensive allocation in a portfolio for liquidity and downside protection, with Australian investors typically using the Australian dollar. Much like equities and fixed income, diversifying cash can assist with risk management, particularly in volatile periods. For example, holding currencies other than the Australian dollar might buffer the cash allocation in periods where the Australian dollar is weak. The US dollar often holds appeal to Australian investors as a result of its strength compared to the Australian dollar. AUD/USD 14 May 2015-12 May 2020 The US dollar has traditionally been viewed as a safe-haven asset, with most global central banks keeping it as a reserve currency and many international transactions conducted in the US dollar. The value of the US dollar tends to be less volatile, particularly compared to emerging markets, backed by what is to the most part seen as political and economic stability. Trade your conviction Investors can also use cash investments to make tactical decisions on how they expect a currency to perform. For example, investors who believe the US dollar is likely to appreciate, may increase their cash allocation to the US dollar while those who believe it is likely to depreciate may choose to reduce their allocation. An ETF like ZUSD is a simple and liquid way to trade your convictions on the US dollar, allowing you to move quickly based on your changing market views. It may also be more cost-effective and accessible for some investors when compared to setting up cash deposits internationally or using a currency exchange. Demand for the US dollar globally driven The US dollar is heavily used across the globe. There is more than $13 trillion in US dollar denominated assets held in banks outside the US, reflecting approximately 15% of world GDP. Approximately 80% of global trade financed by the Bank for International Settlements (BIS) is in US dollars (BIS finances 35% of global trade). The US dollar has also been used by the US Federal Reserve (the Fed) to improve liquidity within the US and other countries by way of swap accords. An example of how this works is as follows: the Fed has an agreement with the Reserve Bank of Australia to exchange US$60 billion of US dollars for Australian dollars and reverses this transaction at a later point in time. The Fed has permanent swap arrangements with the United Kingdom, Canada, Japan, European Central Bank and Switzerland but set up temporary relationships at the start of the COVID-19 pandemic with Australia, Brazil, Denmark, Mexico, New Zealand, Norway, Singapore, South Korea and Sweden. This has been to support the large demand and tight supply of the US dollar outside the US and has resulted in an increase from US$60 million in the first half of March 2020 in swap activity to nearly US$400 billion at the start of April 2020. Depending on how the COVID-19 pandemic continues to evolve, demand for the US dollar – either through swap activity or broader global activity – may put upward pressure on the greenback. Those who believe this is likely may choose to ‘go long’ on the US dollar by taking exposure to it either by buying US dollars or other means, such as ZUSD. Currency exchange and equity markets The exchange rate between the US and Australian dollars correlates negatively with US equity markets as represented by the S&P 500, meaning that the US dollar tends to appreciate against the Australian dollar when the US share market is falling and vice-versa. In other words, the Aussie dollar tends to perform well when markets are rising, which is linked to demand for Australia’s resources-heavy exports. This is demonstrated further in the following charts. As shown in the correlation panel at the bottom of the chart below, across 5 years there is a negative relationship between the movements of the S&P 500 compared to the USD/AUD rate. In periods of more pronounced downturns, the correlation has become more negative, as seen in the global financial crisis and the more recent volatility in March 2020. Long term S&P 500 vs USD/AUD rate (performance in top chart and correlation in bottom chart) Source: Bloomberg, 14 May 2020 To highlight how pronounced that relationship can be the chart below shows a strong negative relationship between the S&P 500 and the USD/AUD rate in the recent months of COVID-19 driven volatility. Short-term S&P 500 v USD/AUD rate (performance in top chart and correlation in bottom chart) Source: Bloomberg, 14 May 2020 An enhanced approach to the US dollar ZUSD tracks the USD/AUD rate and invests in US dollar bank deposits with maturities ranging from overnight to three months and aims to earn a rate above the rate available on overnight deposits. Deposits are held with one or more Authorized Deposit Taking Institutions and earn a variable rate of interest spread across a range of maturities to enhance yield, while maintaining the liquidity of the fund. Generally though, exposure to the US dollar through ZUSD may assist as a buffer against weakness in the Australian dollar and offer diversification in the cash allocation of a portfolio. Alternatively, investors may choose to consider ZUSD as a trading tool for a short-term tilt to access any strength they may anticipate in the US dollar. ZUSD is the only physical US dollar ETF offering quarterly distributions. This may make it appealing to income-focused investors. More information on ZUSD Fund Name ETFS Enhanced USD Cash ETF ASX Code ZUSD Management Fee 0.30% p.a. Distribution Frequency Quarterly For more information on ZUSD, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: firstname.lastname@example.org Phone +61 2 8311 3483 Email: email@example.com
May 13, 2020
How to build your clients’ portfolios to meet their goals The unpredictable nature of markets means that advisers need to be pragmatic and measured in their approach to meeting their clients’ goals, ranging from building a house deposit and paying for education to generating a consistent retirement income while maintaining enough capital for aged care deposits. Whatever the goals, most advisers typically need to be able to preserve a certain level of capital for their clients, while also investing for long term growth or for stable income. An enhanced core-satellite approach to portfolio construction can offer a cost-efficient and measured way to target investment goals and manage market volatility. Download the complete paper or read the summary below: What is enhanced core-satellite investing? In enhanced core-satellite investing, the core is made up of passive exposures, including smart beta, to major asset classes (mainly equities and fixed income) while satellite investments are more opportunistic and designed to seek specific growth outcomes, sometimes at higher levels of risk. Satellite investments might traditionally have been active managed funds or direct investments in companies or real estate but are now equally likely to be selected from the tailored ETFs available today. Generally, the core might be 65-85% of the portfolio, depending on the investor’s goals, investment horizon and risk tolerance, while satellites would represent 15-35%. How this might look in practice is as follows: an investor focused on income might use the satellite components for yield or proactively switch to defensive or growth tilts to bolster their core investments, depending on market conditions. Their core might include investments such as ETFS S&P/ASX 300 High Yield Plus ETF (ASX code: ZYAU) or ETFS EURO STOXX 50 ETF (ASX code: ESTX). In the current market conditions, the investor might choose to increase exposure to defensive investments to the satellite like ETFS Physical Gold (ASX code: GOLD), or include an exposure to foreign currencies like the US dollar which offer a higher yield compared to the Australian via an ETF like ETFS Enhanced USD Cash ETF (ZUSD). How enhanced core-satellite investing supports client needs and goals? Core-satellite investing is a flexible approach and the core will look different according to the individual investor. A high growth strategy might have a core with a higher proportion of ‘riskier’ assets like equities, while a defensive strategy might focus more on assets like gold or fixed income. Investors should consider the core as where they set their strategic asset allocation – where the long-term targets are set for the investment composition to meet your goals, needs and views. By contrast, the satellite is for tactical asset allocation – for shorter-term investments based on market and world conditions that are likely to be more temporary. [Learn about how core-satellite investing has worked during the COVID-19 pandemic here] Core-satellite portfolio construction also assists in cost management for investors. Passive investing is typically lower cost when compared to actively managed funds. Using ETFs may offer additional pricing efficiencies for investors, such as lower administration and management fees as well as lower entry point compared to managed funds and listed investment trusts. Other considerations from using ETFs may be benefits from liquidity which can assist in flexibility to move based on market conditions or to free up funds to meet specific cash needs. There is also a wide range of ETFs available, assisting advisers in identifying those which may fill specific portfolio gaps, match specific goals or even meet particular views held by clients. 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.
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. The essentials, defensive assets and growth trends should be considered by advisers exploring the opportunities to tilt the satellite portion of their clients’ portfolios. Incorporating the essentials There are a number of areas which may benefit from the current situation – or if not benefit, then at least be largely able to continue normal operations. Companies in the consumer staples sector is an easy starting point. People need basic supplies to live and supermarkets like Coles and Woolworths continue to operate and have seen increased demand in these times. There are even pockets to consider in the consumer discretionary sector as people use lockdown to carry out home based activities or upgrade the technology they use to work from home. Infrastructure, such as railways, energy suppliers and telecommunications, is a sector that continues to operate in periods of volatility. These types of companies normally have monopolistic fee structures and have very high barriers to entry with predictable revenue streams. This means they aren’t expected to rise as much in good times but are less likely to be materially impacted in the bad times. In the current situation, telecommunications has benefitted from an increased dependence from a population working from home. An ETF like ETFS Global Core Infrastructure ETF (ASX code: CORE) can offer exposure to global infrastructure companies in a client portfolio. Defending against volatility Defensive assets like gold or silver can offer a buffer in volatile markets. 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. You might choose to use an ETF like ETFS Physical Gold (ASX code: GOLD) or ETFS Physical Silver (ASX code: ETPMAG) in the core of a portfolio or as an additional satellite tilt. Growth trends The volatility of COVID-19 has reset markets, and the time might be favourable for some investors to access growth trends at more favourable valuations. Technology trends have particularly accelerated during COVID-19, with ecommerce and online entertainment experiencing spikes in use. ETFs such as ETFS Morningstar Global Technology ETF (ASX code: TECH) or ETFS FANG+ ETF (ASX code: FANG) offer access to the companies withinthis theme. 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. The growing Indian economy may also pose an opportunity for some investors (learn more here). It can be accessed through the ETFS Reliance India Nifty 50 ETF (ASX code: NDIA).
Apr 20, 2020
Watch Webinar Recording: The FANG Future Recorded on the 7th April 2020, this webinar looks at the ETFS FANG+ ETF: How the FANG companies have been affected by the current COVID-19 situation and the outlook ahead The highly traded high growth companies held in FANG Why we launched FANG and how to use it in a portfolio Why invest via an ETF rather than using alternative investment options Note: skip to 2:53 for start of presentation
Apr 07, 2020
Gold has grabbed headlines during the COVID-19 situation, as investors have raced to safe-haven assets. While gold is valued as a hedge against short term volatility, it can also hold a long-term role in a diversified portfolio given its defensive and growth qualities. Gold can represent 2-10% of a portfolio, depending on an investor’s needs or strategy, but many investors are missing this allocation. For these investors, it has become a question of why not? Gold as a safe haven Gold has both defensive and growth qualities, which has led to its position as an investment safe-haven in times of volatility. It can act as a store of value, as well as holding the potential to grow. There are two key reasons for this. 1) Gold has a low, and at times, negative correlation to other asset classes. That is, it performs differently to other asset classes and its performance is not necessarily associated with what is happening in other asset classes. This is shown in the table below: Australian Equity Global Equity Australian Fixed Income Global Fixed Income Commodities Correlation -0.29 -0.12 0.37 0.06 0.31 Source: Bloomberg data as at 31 December 2019. Correlations are calculated monthly over 20 years in Australian dollars. Australian equity is represented by the S&P/ASX200 Total Return Index. Global equity is represented by the MSCI World Total Return Index. Australian fixed income is represented by the Bloomberg AusBond Composite 0+ Yr Index. Global fixed income is represented by the Bloomberg Global Aggregate Total Return Index. Commodities are represented by the Bloomberg Commodity Total Return Index 2) Gold has the ability to offer positive performance in a range of market conditions, including periods of volatility. For example, if you consider the Global Financial Crisis, gold prices rose 26% while the S&P 500 fell 56%. Even in the current COVID-19 situation, between 19 February and 26 March 2020, gold gained 12.4% compared to the S&P 500 which fell 14.1% and the S&P/ASX 200 which fell 27.8% (all in AUD terms). You can see the performance of gold against other major asset classes in the chart below. Source: Bloomberg, ETF Securities, as at 26 March 2020 This ability to perform in a range of markets comes down to gold’s position as a consumer-driven and investment-driven asset. From a consumption perspective, while around 50% of its use is in jewellery, gold is also heavily used for other purposes such as electronics or even part of medical and diagnostics equipment [1,2] COVID-19: gold price falls and rises Given the facts around gold as a safe-haven asset, investors may therefore wonder what happened when gold prices fell across the week starting 16 March 2020 and how gold has performed across the COVID-19 situation to date. On the whole, gold has seen increased interest and flows during the COVID-19 situation, but markets did see price falls across the week commencing 16th March 2020. It is worth understanding why this happened, as it was less related to any concerns about gold and more related to other activities. Gold can be vulnerable to financial deleveraging – that is, investors needing to free up cash for a variety of reasons. Equity markets were hit simultaneously by the COVID-19 situation and a price meltdown in oil markets. This affected investors with leveraged positions who would have needed to sell other assets to free up cash to pay their liabilities. What this looks like is as follows. An investor using their own money and borrowed money to purchase investments is required to maintain the investment account at a certain value – this is a leveraged position (also called a margin loan account). If the total account falls below that value – generally because the investment itself has fallen in value, then the investor will need to ‘top up’ the account with their own cash to restore the account to its minimum value (this is a margin call). As markets fell across the week of 16 March 2020, many investors would have needed to top up their accounts and will have sold other liquid and performing assets, such as gold, to do so. This has occurred in the past too. During the Global Financial Crisis, gold was briefly sold in October 2008 to meet investors’ cash needs for liabilities from the equity market sell off but then recovered and returned 45% in US dollar terms from its October 2008 low into March 2009, compared to the S&P500 which fell 30% in the same period. Since then, gold has recovered, reaching seven-year highs on 25 March 2020 of A$2746.32 per ounce. Source: Bloomberg, ETF Securities The outlook for gold There are a few factors to suggest gold may continue to hold value across the current crisis. Market volatility from COVID-19 While China has begun to reopen after its COVID-19 lockdown, other countries are either in the midst of it or commencing stages of lockdown. From that perspective, investor concerns and volatility may continue for some time yet. The panic has been swift but recovery could take some time. Some sectors, like technology, are in theory well positioned for both crisis and recovery but investor confidence is a different matter. Other sectors, like retail and travel, will struggle during this period and may find ramping up post the crisis takes some time. From this perspective, many investors may continue to look for defensive assets like gold. They won’t be alone. Even central banks may bulk up their stores of gold across this period. The low interest rate environment and prospect of quantitative easing Gold traditionally performs well in periods of low interest rates, with investors using it rather than cash. Interest rates have been low for some time but have dropped further in the current situation. Australian rates have reached lows of 0.25% while the US has dropped to a range of 0-0.25%. Many countries, including Australia have announced fresh rounds of quantitative easing too. Temporary shortage At the same time as increasing numbers of retail investors seek to purchase physical gold bullion, supply chains have been disrupted by COVID-19 . Refineries in Europe, particularly in Italy, have been unable to keep up with demand forcing traders to move into wholesale markets. While refineries in normal circumstances would be able to manage the surge in interest, lockdowns over COVID-19 may continue to place pressure on supply, in turn pushing prices higher. Accessing gold using an ETF The traditional forms of access to gold were either through physical holdings or an indirect exposure by owning shares in gold mining companies. Both had their challenges – physical holdings namely through prohibitive costs and indirect exposure by opening to assorted company risks. Generally speaking, physical holdings offer a more pure exposure. The first gold-backed ETF was launched in 2003 by ETF Securities, it still trades today as ETFS Physical Gold (ASX:GOLD) and held $1.65 billion in assets as at 27 March 2020. Gold-backed ETFs are literally as described, where physical gold is purchased and stored by a fund manager as part of a trust and investors buy units in the trust for exposure to the market movements of gold. Using an ETF for gold exposure has several features and advantages over the physical holdings. Cost tends to be a foremost consideration. Investors in physical gold may need to consider aspects like freight, storage and insurance, as well as the volumes available through their broker of choice. For example, some brokers may sell by the ounce which may be cost-prohibitive for some retail investors. Units in gold-backed ETFs tend to have management fees that are often cheaper than the costs for individuals to store and insure their own gold The liquidity and ease of use of gold-backed ETFs compared to physical gold is another consideration. Investors holding ETFs may be more easily able to adjust their holdings to reflect activity in the market, buying or selling small quantities when needed compared to those holding physical holdings which may have higher minimum trading quantities and take longer to transact. This can be a challenge for some investors depending on their size and horizon of their investment. ETFs are also typically easier to use compared to physical gold holdings, requiring as little as a trading account to get started and can be done anywhere. It can be less intimidating for many investors who may not be aware of even where to start for physical purchasing and trading. Understanding the risks As an investment tool, ETFs are subject to a range of general investment risks, such as market risk or counterparty risk. Market risk relates to loss of value due to movements in price. Changes in the price of gold relative to an investors purchase price create gains or losses. Counterparty risk is the risk that the other party to your investment defaults or mismanages your assets. For example, the risk that the custodian holding the physical gold (whether for an ETF or individual investor) has not securely stored the gold and it is stolen or lost. Custodians of assets in managed funds, like ETFs, typically use major international vaults to store the physical assets which offer highly sophisticated security arrangements compared to personal safes or small storage companies. Another example of counterparty risk might occur at the time of investment purchase if the trading tool or company doesn’t actually use your funds to buy the selected investment or asset. Using established and credible companies to purchase investments can be an important way of managing this risk. There can also be variation in the way that gold-backed ETFs are managed, so investors should research their options. One crucial difference to watch for is whether the ETF uses allocated or unallocated gold. Allocated gold means you own the physical gold based on your unit holding. In the event of a default by the custodian, your holding is unaffected. ASX: GOLD uses allocated gold and you can redeem your units for the physical gold. Unallocated gold means your cash investment is ‘backed’ by the physical gold holdings of the issuer still providing you with exposure, but these holdings remain the property of the issuer. This form of gold-backed fund has additional credit risk for investors. Should a default occur, you don’t have ownership over the physical gold so your claim is considered and paid alongside all other parties of the issuer who might also have a claim. Unallocated gold is used in many gold-backed ETFs so it is worth investigating the structure and management before you decide to invest. Both physical holdings and ETFs can also be subject to liquidity risk. Liquidity risk is the risk that the physical holding can’t be sold quickly or at a fair price in the market. Investors will need to weigh up all these risks before deciding to buy physical gold or a gold-backed ETF. Why aren’t you investing in gold? While events like COVID-19 and the Global Financial Crisis provide a clear demonstration of gold’s defensive qualities, investors should consider their longer-term strategy. Offering diversification, growth and stability over time, gold can be a suitable inclusion for many investors. In turn, gold-backed ETFs can offer liquid, cost-effective and easy to access exposure all using your existing trading platforms.
Apr 02, 2020
The current COVID-19 concerns have rattled markets, with advisers fielding calls from concerned clients. In some cases, advisers may choose to add tilts or hedges for their clients’ investments, while for others, it will be better to stay the course. There are a range of ways to manage market volatility in a portfolio, some universally valuable, others dependent on the individual clients. In this paper, we’ve highlighted some of the most common. Download now In your discussions with clients, these principles can be a helpful starting point in reinforcing your approach and providing comfort in uncertain times. 1. Diversification Reinforcing the value of diversification with your clients can be as simple as the analogy of not having all your eggs in one basket. The current environment has reinforced the importance of diversification within asset classes and sectors, with some companies able to benefit (ie supermarkets) and others needing to close down (i.e. travel and tourism companies). 2. Incorporating more stable, less cyclical investments Holding companies which are able to consistently operate regardless of market conditions, such as essential services infrastructure, can assist in buffering portfolios against falling markets. 3. Alternative investments Investments which are designed to perform differently to equity and bond markets can range in complexity. Gold is a simple asset with a low or even negative correlation with other asset classes which has acted as a safe-haven investment across a number of market events over time. 4. Strategic tilts For some investors, incorporating short-term tilts alongside the long-term core strategy can assist in managing market volatility. Depending on the strategy, this could mean adding a tilt to high growth (and therefore ‘riskier’ assets) or adding more defensive position. ETFs can be an effective tool for managing volatility for your clients. Beyond characteristics including liquidity and cost-efficiency, the wide range available, broad exposures and instant diversification mean they can be suitable across investor types. For more information on our range of ETFs and using them in your clients’ portfolios, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: firstname.lastname@example.org Phone +61 2 8311 3483 Email: email@example.com
Apr 01, 2020
Key highlights India, like all other markets, has been deeply affected by COVID-19 However, this has now reset company valuations to highly attractive levels When the markets begin to recover there are strong reasons to believe India can ﬂour-ish anew One of the easiest, most cost-efﬁcient ways to get exposure to India for Australians is via the ETFS Reliance India Nifty 50 ETF (ASX code: NDIA) India: Current State of Play In the past month, the Indian stock market has undergone one of the sharpest corrections in history. Growth forecasts have seen sharp downgrades and India is no exception, with expected weakness for the remainder of the year. While these concerns are real, global policymakers have responded to this crisis with unprecedented levels of monetary and ﬁscal stimulus. Still, the panic in the market is visible in record levels of volatility which has led to deep cuts across most sectors. Market Valuations Return to GFC Levels After this sharp correction, market valuations have returned to near record lows not seen since the GFC. (Source: Blomberg & IMF Estimates) Policy support is expected to continue for a prolonged period and it is hoped that the COVID-19 epidemic will begin to subside in the second half of the year. With this in mind and given valuations are at near record lows, it seems the fallout of this epidemic is already priced in. While nobody can predict the extent to which the markets will continue to fall, or how long it will take for the current situation to return to normal, most market experts agree that current market valuations are attractive. Therefore, this could represent an attractive buying opportunity for long-term investors. Why India can recover Fiscal Response: If the COVID-19 epidemic results in prolonged lockdown a ﬁscal stimulus of at least 2% of GDP is likely. As an example of past stimulus, during the GFC additional expenditure amounting to 3% of GDP was provided  Strong Monetary Response: The RBI is expected to cut rates by at least 100bps, with the ﬁrst rate cut of 75bps announced on the 30th of March  Rapid sequential growth for H2: Given India is a domestic consumption country, assuming COVID-19 can be contained and the lock down laws lifted, consumption can pick back up rapidly, without the reliance on international inﬂows  Access To India: ETFS Reliance India Nifty 50 ETF (ASX code: NDIA) One of the simplest ways to access the Indian stock market is through the ETFS Reliance India Nifty 50 ETF (ASX code: NDIA). NDIA tracks the Nifty50 Index, providing exposure to the top 50 large cap Indian companies (covering approx. 60% of the Indian market), most of which are currently available at their multi-year lows. Advantages of investing in the Nifty 50 index: Low cost Eliminates non-systematic risks like stock picking/portfolio manager selection Provides building blocks for portfolio construction Provides exposure to the top 50 blue chip companies who are, potentially, less likely to feel the long-term effects of the COVID-19 shut down For more information on ETFS Reliance India Nifty 50 ETF, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: firstname.lastname@example.org Phone +61 2 8311 3483 Email: email@example.com
Mar 09, 2020
To access the white paper, please click the download now button above. Investors seeking growth in their portfolios need to look outside the box for opportunities in today’s market. The so-called blue-chips of the past are not necessarily the growth drivers of today or the future. Investing in megatrends may offer an effective and sustainable approach to growth in investor portfolios. 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 due to the abundance of managed investments focused on them. There are a range of megatrends influencing the world. A few of these are covered below. 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. Products in focus: > ETFS Morningstar Global Technology ETF (TECH) > ETFS ROBO Global Robotics and Automation ETF (ROBO) > ETFS FANG+ETF (FANG) 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. Products in focus: > ETFS Reliance India Nifty 50 ETF (NDIA) > ETFS FANG+ETF (FANG) 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. Products in focus: > ETFS Battery Tech and Lithium ETF (ACDC) > ETFS FANG+ETF (FANG) For more information on the solutions ETF Securities offers, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: firstname.lastname@example.org Phone +61 2 8311 3483 Email: email@example.com
Mar 03, 2020
What drove India’s performance in 2019 and its outlook for 2020 Investors are increasingly seeing India as a high potential growth market, but it under-performed expectations in 2019. The country continues to see positive structural and economic reforms, leading to the question, what happened and does this change India’s prospects? Read the full paper here. Three drivers of negative performance in 2019 Global markets were generally affected by a range of events across 2019, including the US/China trade war, slowing growth and fear of recession. Beyond this, there were three key drivers behind India’s negative performance. 1. Non-banking financial companies (NBFC) crisis In the last quarter of 2018, an NBFC company called Infrastructure Leasing & Finance Services (IL &FS) defaulted on multiple loans and covenants across India. As a result, banks and mutual funds stopped lending to NBFCs which triggered a liquidity and confidence issue across India which dragged on performance, particularly in early 2019. 2. Government election Though Narendra Modi returned to power in the government election, the focus was on re-election rather than continued structural economic growth in the lead-up to polls. 3. Kashmir Hostilities between India and Pakistan escalated, with the volatility also felt in the economy. These drivers in turn affected manufacturing, core-sector production and consumer and capital goods production. India’s automobile and real estate sectors were also hard-hit. India’s future prospects The Indian government and Reserve Bank of India (RBI) implemented two key measures to resolve the problems of 2019. These included: > Five rate cuts by the RBI to 5.15%. > A corporate tax cut from 30% to 22%. India’s outlook for 2020 is further supported by factors such as low inflation, ongoing reforms and political stability. As such, the prospects remain positive and it is anticipated to continue to benefit from overarching themes across Asia such as the growth of the middle-class. 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: firstname.lastname@example.org Phone +61 2 8311 3483 Email: email@example.com
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. Managing a retirement portfolio for income and growth Retirement portfolios offer a particular challenge in advice, given their more complex needs. They need to generate a stable income, preserve capital and still offer some level of growth to allow investors to manage inflation and longevity risks, along with a reasonable standard of lifestyle. In the paper No retirement for investments, ETF Securities considers how assets, portfolio construction and product selection can be used to manage retirement in the current market environment. You can download the full paper above, or read the summary following. Part of the solution comes down to diversification of the assets used for income. Retired investors have traditionally relied on domestic fixed income to support their yield needs but are now forced to consider other options. Fixed income can still play a role, for example, diversifying to international sources such as US fixed income which currently offers a higher interest rate may be part of the answer. Commonly, investors are being forced into riskier income approaches, such as through dividend streams. High yield equities may work for some retired investors, pending their risk tolerance along with overall portfolio construction. For example, they may consider how to offset the higher risks of high yield shares in other parts of their portfolio. Using alternatives in the form of commodities like gold may assist with offering stability and diversification to manage the volatility which could occur in high yield shares. Alternatively, looking to investments in more stable, less cyclical industries may be more suitable. Infrastructure is one option. It includes many essential services areas like utilities, telecommunications, industrials and transport which tend to be less vulnerable to market movements and cycles. Finally, product choice can be part of the solution to market conditions. Flexibility is important in this environment, but retired investors also need to be conscious of costs, risks and quality. Bearing these in mind, ETFs may be a suitable option due to characteristics such as low costs, ease of use, liquidity and a wide range to assist in meeting specific portfolio needs or gaps. For more information on the solutions ETF Securities offers, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au Phone +61 2 8311 3483 Email: firstname.lastname@example.org
Jan 27, 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: email@example.com
Jan 23, 2020
To access the white paper, please click the download now button above. The continued evolution of the ETF landscape has seen it move from broad-based index replication, to select sectors, based on certain themes or even smart beta (alternative weighting to capture yield or value). In 2020, ETF Securities expects a number of trends to influence the ETF landscape across economic drivers, investor dynamics and enhanced investment styles. Below is a summary of these, you can also read more detail in the ETF Trends 2020 Whitepaper. Economic themes for ETFs Investors have been faced with globally low interest rates across 2019 and this is anticipated to continue due to geopolitical risks, such as tensions between US and Iran, or typical market volatility associated with a US Presidential Election year. Further to that, Australian investors have faced ongoing economic challenges from the slowdown in the resources and residential property sectors, stagnant wages growth and employment figures and will see further repercussions from the devastating 2019/2020 fire season. These themes will mean the following for ETFs: The quest for yield may see interest in US fixed income ETFs (due to the higher yield compared to Australia and Europe) as well as ETFs which can offer dividends for alternative sources of income. Commodity ETFs, particularly gold and silver, tend to benefit from low interest rates due to a low opportunity cost – as an asset with both consumption and investment appeal, it has a low correlation to equity markets and other assets and therefore tends to perform in a range of markets. Internationally focused ETFs will appeal to those wanting exposures outside of Australia and the weak Australian dollar, such as to regions like Europe, sectors less available in Australia like technology or currencies like the US dollar which continues to be stronger than its counterparts. Investor dynamics and enhanced investment styles Increasingly, investors are expecting greater transparency in their investments and want investments to reflect their ethical and social values. Following from the GFC and the Royal Commission, there is also greater cost and fee consciousness. ETFs naturally are benefiting from this environment due to attractive characteristics like transparency, liquidity and typically lower fees. Further to this, improving technology has allowed for greater tailoring of strategies and even active management. The ETF landscape is growing as a reflection of this. More ETFs are appearing in the market to offer access to specific themes or growth areas like robotics or emerging markets, or to reflect views or concerns on ethical and social matters, such as the environment. Continued growth in bespoke and smart beta strategies offering alternative weighting to the index or the ability to exclude certain factors to minimise risks. Some of these strategies are being developed at the behest of larger institutions but may eventually reach retail audiences as technology continues to advance. Active ETFs are emerging, and with the lift of the ASIC ban in December 2019, are likely to continue to grow. Across 2020 and the coming years, ETFs are likely to increasingly evolve to fill the gaps in investor needs and demands. 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: firstname.lastname@example.org