Resources

Weekly ETF Monitor for week ending 29 November 2019

thumbnail

Dec 03, 2019

This week's highlights ETFS S&P Biotech ETF (CURE) was last week’s top performing ETF, returning 6.5%. Domestic resource funds also fared well, with MVR, OZR and QRE all posting strong gains. Australian property funds SLF and VAP were also amongst the top performers. China and emerging markets funds (CNEW and EMKT) declined for the week. Palladium surged to new all-time highs, with ETFS Physical Palladium (ETPMPD) returning 4.1%. Other precious metals pulled-back last week. Crude oil declined, with OOO falling 4.5% and global energy company fund FUEL down 1.9%. Total flows into domestically domiciled ETFs were $171m, while outflows totalled $51m. IOZ and GOLD saw the largest inflows for the week, followed by HBRD and MVW. Cash fund AAA saw the bulk of the outflows for the week. AAA was the most traded fund last week, followed by VAS and STW. VSO, VHY and GOLD saw above average volumes. ETFS S&P Biotech ETF (CURE) has gained more than 22% over the past two months. A raft of FDA approvals and some high profile acquisitions by large pharmaceutical companies have spurred a recovery across the biotechnology sector following a lacklustre year thus far. Further FDA activity is expected over the coming months.

Download now

Weekly ETF Monitor for week ending 22 November 2019

thumbnail

Nov 26, 2019

This week's highlights Precious Metals and Healthcare rallied last week. ETFS S&P Biotech ETF (CURE) was up 4.3% over the week. Precious Metals Palladium, Platinum and Silver also had a good week. ETFS Physical Palladium (ETPMPD) was up 2.7%, ETFS Physical Platinum (ETPMPT) up 2.5% and ETFS Physical Silver (ETPMAG) up 2.2%. Australian Financials underperformed as Westpac fell heavily in light of recent developments. VanEck Vectors Australian Banks ETF (MVB) was down 3.4% and BetaShares S&P/ASX 200 Financials Sector ETF (QFN) was down 3%. Total net inflows were over $310m for the week. The best flows for the week were spread across Australian Equities and Gold. Australian Market Cap ETFs IOZ and STW both had strong inflows of $58m and $56m respectively. GOLD also had another strong week adding $14m as investors continue to add the physical bullion to their portfolios.

Download now

Five reasons to hold gold at the core of your portfolio

90de3514d4df27a0c9aa0c1429289f60.png

Nov 20, 2019

Published: 20 November 2019 Product in focus: ETFS Physical Gold Key Points: Gold has long been considered a safe-haven asset used by investors to hedge against event risk but is often not appreciated for the way in which it can aid portfolio returns in different market conditions. Over the long-term gold has close to zero correlation with share markets. This is good for investors. Uncorrelated assets provide diversification and help improve returns or reduce risk within a portfolio. ETFS Physical Gold (ASX: GOLD) is a simple and cost-effective and efficient way to access gold by providing a return equivalent to the movements in the gold spot price. At ETF Securities, as manager of Australia’s largest and the world’s oldest exchange traded gold product (ASX: GOLD), we spend a lot of time looking at how gold can work for our clients to improve outcomes across their portfolios. Gold is well-known as a hedge against event risk and as a way of preserving capital against inflation, but people often don’t appreciate how well a long-term holding can aid portfolio returns in different market conditions. When we talk about using gold in a portfolio, we tend to focus on its role as a core strategic holding, not an asset to trade in- and out- of on a regular basis. This article outlines five key reasons you should consider gold as a core holding. 1. Gold is an effective hedge against unpredictable events Gold has been one of best performing assets globally over the past year and has attracted a lot of attention. In Australian dollar terms gold has never been more valuable, having risen 32% over the 12-month period to the end of September. Not only has gold performed very well, but it has done so against a backdrop of rising geopolitical risk, periodic bouts of equity market volatility, global growth concerns and an abrupt shift in monetary policy, both domestically and abroad. The recent past is just one example in gold’s long history of performing well when markets are in turmoil or when risks are heightened. Other prominent examples include[1]; the 1987 stock market crash; gold rose 6% while the S&P 500 fell 33% the global financial crisis; gold rose 26% while the S&P 500 fell 56% the European sovereign debt crisis; gold rose 9% while the S&P 500 fell 19% It is not surprising, therefore, that many people use gold as a safe-haven asset in much the same way they would use insurance to protect their physical assets. Of course, you don’t just take out home insurance when you feel a flood or fire may be imminent, which is why we advocate holding gold long-term to protect against events that are inherently unpredictable. 2. The price of gold is driven by many factors and is difficult to predict Gold does not conform to traditional financial asset principles and there is no widely accepted model to determine a fair price for gold. While many different models exist, it is fair to say that the price of gold is driven by a wide range of variables and is difficult to predict. Gold is both a consumption and an investment asset, which often makes it both pro- and counter-cyclical at the same time. Levels of economic growth are positively related to demand for gold for use in jewellery and technology products, while expectations of lower growth may drive investment or safe haven buying. Gold is used as a store of wealth and as protection against inflation, while it is also in demand when interest rates and inflation are low and economic prospect look poor. Further, central banks are key investors and have massive reserves and a wide range of different motivations for owning gold, which can heavily influence demand. With such an array of competing factors for which to account, forecasting changes in the price of gold and the timing of changes is extremely difficult. We therefore rarely recommend gold as a trade-in/trade-out investment, where market timing is key. Instead we focus on how gold can be used as a core strategic holding. Depending on their circumstances, we often see investors using gold with a 2%, 5% or 10% allocation across their portfolios. 3. Gold’s long-term returns are better than many other asset classes Since gold became a freely traded commodity in 1971 its price has increased by an average of 11.7% per year in Australian dollar terms. Chart 1 shows how gold has performed relative to other major asset classes from the perspective of an Australian investor. While some investors worry that gold produces no regular income, its overall returns have out-stripped many more widely used investments. Gold has significantly outperformed both fixed income investments and diversified commodities. Its long-term returns are comparable with share market returns. Chart 1. Source: Bloomberg data as at 30 September 2019. Returns shown are compounded annual growth rates. Australian Equity is represented by the S&P/ASX 200 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 Barclays Global Aggregate Total Return Index. Commodities are represented by the Bloomberg Commodity Total Return Index. 4. Gold helps diversify your portfolio when you need it most Over the long-term gold has close to zero correlation with share markets. This is good for investors. Uncorrelated assets provide diversification and help improve returns or reduce risk within a portfolio. Table 1 shows correlations between gold and other major asset classes over 20 years and you can see that gold generally has low correlations with other assets. It tends to be negatively correlated with equities, while being mildly positively correlated with bonds and commodities. Table 1. Source: Bloomberg data as at 30 September 2019. Correlations are calculated monthly over 20 years in Australian dollars. Australian Equity is represented by the S&P/ASX 200 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 Barclays Global Aggregate Total Return Index. Commodities are represented by the Bloomberg Commodity Total Return Index. Not only has gold’s correlation with share markets been low, it has the nice property that it has tended to become more negative when stock markets are falling. Chart 2 shows the correlation between gold and global equities separately considering periods where the equity returns are positive, and then negative. This contrasts with other uncorrelated or “alternative” assets that became highly correlated with stock markets during the GFC. Not only does gold benefit from safe-haven buying during times of market stress, unlike most other financial assets, it has no element of credit risk, which immunises it from extreme market dislocations. Chart 2. Source: Bloomberg data as at 30 September 2019. 5. Gold can improve risk-adjusted returns over the long-term To demonstrate the impact that a core gold position can have in a portfolio, we have simulated adding a gold holding to a collection of typical asset allocation models that include Australian and international equity and fixed income assets with four different allocations representing Conservative, Balanced, Growth and High Growth profiles. Charts 3 - 6 below show the outright return, volatility or risk (measured by standard deviation), maximum drawdown or biggest loss and the risk-adjusted return (measured by the Sharpe ratio) for each asset allocation portfolio and for each portfolio with the addition of 2%, 5% and 10% gold. Source: Morningstar Direct data from 31 March 2003 to 30 September 2019. Conservative, Balanced, Growth and High Growth portfolios are represented by the Vanguard LifeStrategy funds, which have been live since February 2003 or longer. Gold is represented by ETFS Physical Gold (ASX: GOLD), which has been live since March 2003. Figures quoted are in Australian dollars and are net of fees. What we observe is that the addition of gold to an otherwise diversified portfolio has aided performance in every case. Outright returns are higher and increase as the gold allocation is increased. From a risk perspective, however, the impact of gold is even more important. The addition of gold reduces risk through gold’s ability to provide diversification. Risk-adjusted returns are higher and importantly drawdowns, or worst-case scenarios, are significantly improved. [1] Bloomberg data as at 30 November 2018

Download now

Weekly ETF Monitor for week ending 15 November 2019

thumbnail

Nov 18, 2019

This week's highlights Gold miners, property, healthcare and infrastructure funds outperformed last week. VanEck Vectors Gold Miners ETF (GDX) was the week’s top unleveraged performer. Property funds (SLF and MVA), global healthcare (IXJ), sustainability funds (FAIR and ETHI) and infrastructure (GLIN) were also amongst the top performers for the week. Asian equities underperformed, with IZZ, CETF, VAE and UBP all amongst the week's poorest performers. Precious metals mostly rallied. ETFS Physical Silver (ETPMAG) added 1.0% and ETFS Physical Gold (GOLD) was up 0.9%. ETFS Physical Palladium (ETPMPD) fell 1.8% from recent highs. Total flows into domestically domiciled ETFs were $399m, while outflows totalled $52m. New fund SELF saw the week’s largest inflows with $101m in seed funding. IHCB, IEM and QOZ saw the next largest inflows for the week, followed by a range of domestic equity funds. Cash fixed income funds IGB, AAA and IHEB saw the largest outflows for the week. VAS was the most traded fund last week, followed by AAA and IOZ. VSO and GOLD saw above average volumes. SelfWealth SMSF Leaders ETF (SELF) launched last week. The fund tracks an index that uses a unique and innovative peer-to-peer methodology to select a portfolio of ASX-listed companies based on the trading activities of over 80,000 SMSF portfolios.

Download now

Global Infrastructure: Income Certainty and Stable Growth

Nov 13, 2019

Published: 13th November 2019 The global economy is showing signs of strain and expectations from investors around growth and income is decreasing. Can global infrastructure assets provide a solution? Infrastructure has long been a favourite equity asset class for investors as it offers the following characteristics: Access to long term stable cash flows, given people continue to pay for infrastructure in their day-to-day lives, e.g. toll roads, airports and utilities Upfront capital - investment is high for large infrastructure projects and generally the cash flows from investment are realised for long periods into the future High barriers to entry, reducing competition Infrastructure assets have the ability to produce stable income with low volatility and should therefore be a staple in investor portfolios. With the global uncertainty experienced so far during 2019, investors may look to infrastructure as a source of stable capital and yield. ETFS Global Core Infrastructure ETF CORE offers a low cost way to gain exposure to quality global infrastructure companies which have exhibited the least volatility in the last 6 months. CORE has been resilient during 2019’s market volatility and has returned 19% in the last 12 months with a yield of 4% (31 October 2019). Please see below some further information on CORE, outlining why you should consider this ETF for your infrastructure exposure. Attractive Income CORE has a 12 month yield of 4.11% to the 31 October 2019 Stable Growth Since CORE’s launch in 2017 it has returned over 13.5% p.a. Since its inception CORE has delivered risk adjusted returns (refer to sharpe ratio table) above both the S&P Global Infrastructure Index and the MSCI World Index Low Volatility CORE selects the 75 least volatile global infrastructure companies and weights them by their inverse volatility You can see the effect of CORE’s low volatility screen in the performance table below Period Total Return (p.a.) 3M 6M 1Y 2Y from 19 Sep 17 ETFS Global Core Infrastructure ETF (AUD, NAV, TR) 3.16% 8.19% 18.89% 11.70% 13.66% S&P Global Infrastructure Index (AUD, TR) 4.03% 8.75% 24.39% 11.61% 12.69% MSCI World Index (AUD, TR) 2.48% 6.00% 15.70% 12.61% 15.40% Annualised Volatility 3M 6M 1Y 2Y from 19 Sep 17 ETFS Global Core Infrastructure ETF (AUD, NAV, TR) 6.95% 6.97% 7.38% 8.04% 8.04% S&P Global Infrastructure Index (AUD, TR) 8.57% 8.37% 8.70% 8.95% 8.84% MSCI World Index (AUD, TR) 11.26% 10.74% 10.86% 10.67% 10.53% Sharpe Ratio 3M 6M 1Y 2Y from 19 Sep 17 ETFS Global Core Infrastructure ETF (AUD, NAV, TR) 0.31 1.00 2.35 1.25 1.49 S&P Global Infrastructure Index (AU, TR) 0.35 0.90 2.63 1.11 1.24 MSCI World Index (AUD, TR) 0.13 0.45 1.30 1.02 1.30 Source: Bloomberg as at 31 October 2019. Returns in AUD. Past performance is not an indication of future performance. Global Diversification Due to CORE’s rules based approach it does not have a significant concentration in any single company and instead offers a diversified infrastructure exposure As at 31st October 2019 the top 10 stocks in CORE accounted for just 18.80% of the portfolio The US and Canada make up the largest portion of CORE’s portfolio, followed by Asia and Europe. Australia has a very small exposure in the index, with QUBE Holdings as the only Australian stock currently in the portfolio Source: Bloomberg as at 31 October 2019. Returns in AUD. Past performance is not an indication of future performance.

Download now