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The evolution of ETFs
The information contained in this document is general information only and does not constitute
personal financial advice. It does not take into account any person’s financial objectives, situation
or needs. It has been prepared by BetaShares Capital Limited (ABN 78 139 566 868, Australian
Financial Services Licence No. 341181) (“BetaShares”). The information is provided for
information purposes only and is not a recommendation to make any investment or adopt any
investment strategy. BetaShares assumes no responsibility for reliance on this information. Past
performance is not indicative of future performance. Investments in BetaShares Funds are subject
to investment risk and investors may not get back the full amount originally invested. Any person
wishing to invest in BetaShares Funds should obtain a copy of the relevant PDS from
www.betashares.com.au and obtain financial and tax advice in light of their individual
circumstances.
Disclaimer
Confidential – may not be distributed without the consent of BetaShares Capital
About Me
David Bassanese
Chief Economist, BetaShares
Formerly with:
• AFR
• Macquarie Bank
• OECD
• Treasury
Author of “The Australian ETF Guide”
Confidential – may not be distributed without the consent of BetaShares Capital
4
About BetaShares
Recap on ETFs – the nuts and bolts
Some investment products for SMSFs to consider
Confidential – may not be distributed without the consent of BetaShares Capital
5
Contents
About BetaShares
Recap on ETFs – the nuts and bolts
Some investment products for SMSFs to consider
Confidential – may not be distributed without the consent of BetaShares Capital
• A “Top-4” leading manager of ETFs
• Funds under Management ~$3b
• Australia’s broadest product range of exchange traded
products
• Designed for Australian investors
About BetaShares
Confidential – may not be distributed without the consent of BetaShares Capital
7
An award winning ETF provider
BetaShares has received the following awards:
Money Management/Lonsec Fund Manager of the Year Awards 2016
• Best ETF Provider 2016
ETFI Asia Asset Management Awards 2016
• Best High Dividend ETF in Asia – BetaShares Australian Dividend Harvester Fund (managed fund) (HVST)
• Best New ETF in Australia – BetaShares NASDAQ 100 ETF (NDQ)
• Best Currency ETF in Asia – BetaShares U.S. Dollar ETF (USD)
ETF Express Global Awards 2016
• Best Currency ETF Management Firm
Confidential – may not be distributed without the consent of BetaShares Capital
Australian Equities Global Equities Equity Income Managed Risk/
Defensive Equity Cash
QOZ
QFN
QRE
NDQ
UMAX
QUS
FUEL
FOOD
HACK
BNKS
HEUR
HJPN
MNRS
DRUG
HVST
YMAX
AUST
WRLD
AAA
Short Geared Currency Commodities Active
BEAR
BBOZ
BBUS
GEAR GGUS
USD POU EEU
QAG QAU OOO QCB
GLIN RENT DMKT
BetaShares Product Range
9
Contents
About BetaShares
Recap on ETFs – the nuts and bolts
Some investment products for SMSFs to consider
Confidential – may not be distributed without the consent of BetaShares Capital
Growth of the Global ETP Industry
10
$428 $598
$851 $772
$1,156
$1,483 $1,525
$1,944
$2,396
$2,797 $2,959
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Global ETP Industry AUM(1) (US$b)
Source: BlackRock 1 Includes all exchange traded products (e.g. exchange-traded funds, exchange-traded commodities and exchange-traded notes)
Confidential – may not be distributed without the consent of BetaShares Capital
$0
$5,000
$10,000
$15,000
$20,000
$25,000
July 04 July 05 July 06 July 07 July 08 July 09 July 10 July 11 July 12 July 13 July 14 July 15 July 16
Confidential – may not be distributed without the consent of BetaShares Capital 11
Growth of the Australian ETF Industry
Australian ETP Market Cap: July 2004 August 2016 (A$m)
04 – 16YTD
CAGR 31%
#ETPs 7 9 8 5 19 30 37 57 82 81 184 92 139
CAGR: Compound Annual Growth Rate
Source: ASX, BetaShares
Aug 16
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SMSFs have been early (and heavy) adopters of ETFs
• investment fund
• passively managed
• exchange traded
• open ended
What is an exchange traded fund (ETF)?
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• investment fund – diversification & investor protection
• passively managed
• exchange traded
• open ended
What is an Exchange Traded Fund (ETF)?
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• investment fund – diversification & investor protection
• passively managed – low cost, transparent
• exchange traded
• open ended
What is an Exchange Traded Fund (ETF)?
Confidential – may not be distributed without the consent of BetaShares Capital
• investment fund – diversification & investor protection
• passively managed – low cost, transparent
• exchange traded – liquidity, buy & sell like a share
• open ended
What is an Exchange Traded Fund (ETF)?
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• investment fund – diversification & investor protection
• passively managed – low cost, transparent
• exchange traded – liquidity, buy & sell like a share
• open ended – trades close to NAV, tax-efficient
What is an Exchange Traded Fund (ETF)?
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18
What is an exchange traded fund?
ETFs combine the trade-ability and liquidity of
shares with the diversification and cost benefits
of index funds
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19
Key ETF benefit: if
As at 30 June 2015.
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Variations
Track an Index
Non-
discretionary/
Rules Based
Discretionary/
Active
Open-ended
Exchange
Traded
exchange traded
funds (ETFs)
exchange traded
managed funds
exchange traded
active funds
Exchange traded
products
“ETPs”
Investment Strategy
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Confidential – may not be distributed without the consent of BetaShares Capital 21
Contents
About BetaShares
Recap on ETFs – the nuts and bolts
Some investment products for SMSFs to consider
22
BetaShares Australian Dividend Harvester Fund (managed fund) (HVST)
An Investment Fund Tailor-Made for SMSFs & Retirees
Confidential – may not be distributed without the consent of BetaShares Capital
The Fund aims to:
• provide franked income, paid monthly, at least double that of
the market on an annual basis
• reduce volatility and cushion downside market risk.
BetaShares Australian Dividend Harvester Fund (managed fund) (ASX: HVST)
*Underlying Exposures and Sector Allocations will change regularly as a result of the investment strategy
Specifically designed to meet the
investment challenges of SMSFs and
retirees
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24
The Dividend Harvester Strategy
ASX 50
UNIVERSE
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25
The Dividend Harvester Strategy
Stocks paying
dividends this
period
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26
The Dividend Harvester Strategy
Dividend
paying stocks
by highest
grossing yield
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27
The Dividend Harvester Strategy
14 Stock
Portfolio
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28
The risk management overlay defending against market declines
S&P/ASX 200 Index (1992-2013): Cumulative equity return and volatility
Selected periods when increased market volatility was associated with market declines
Source: Milliman Financial Risk Management LLC, 31/12/1991-31/12/2013. The chart above is historical and for illustrative purposes only. It does not represent actual
performance of any investment. Past performance is no guarantee of future results.
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HVST
Past performance is not an indicator of future performance. Source: BetaShares, Bloomberg
Performance comparison: HVST v S&P/ASX 50: inception to 29 July 2016
Confidential – may not be distributed without the consent of BetaShares Capital
HVST has outperformed the S&P/ASX 50 in the past year
Past performance is not an indicator of future performance. Source: BetaShares, Bloomberg
Performance comparison: HVST v S&P/ASX 50: 1 year to 29 July 2016
HVST S&P/ASX 50 Difference
Net income 11.6% 4.8% 6.8%
Franking benefit (est) 3.7% 1.7% 2.0%
Gross income 15.4% 6.5% 8.8%
Price return -6.3% -6.2% -0.1%
Net total return 5.3% -1.4% 6.7%
Gross total return 9.0% 0.3% 8.7%
Confidential – may not be distributed without the consent of BetaShares Capital
Due to the “dividend run up effect” some of the higher income produced by HVST may come at the cost of capital return under performance. But,
• some evidence to suggest market inefficiency, i.e. prices don’t fully adjust downward for dividends about to be paid.
• may mitigated by risk management overlay during periods of market weakness.
• Further offset to the extent full/partial dividend re-investment used.
Risk management does not protect against
• Stock specific or “concentration” risk
• Gap events
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HVST Some things to keep in mind
32
BetaShares Global Sector Series
BetaShares Global Sector Series is currently the most extensive
family of global sector products available on ASX
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33
Agriculture Companies: ASX - FOOD
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34
Over the next 15 years, the world will have 1.2 billion more mouths to feed
Global Population Projections: 1950-2030
Source: UN Population Projections, 2016
0
1
2
3
4
5
6
7
8
9
1950 1960 1970 1980 1990 2000 2010 2020 2030
Developed Countries Developing Countries
billion
Projections
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Confidential – may not be distributed without the consent of BetaShares Capital 35
Rising living standards will also increase calorie consumption per capita
Per-Capita Food Consumption (Beef, Veal & Poultry) by country: 2014
Source: OECD-FAO Database
Australia
Canada
Chile
Israel
Japan
Korea
Mexico
New Zealand
Turkey
United States
RussiaUkraine
South Africa
Brazil
Uruguay
China
India Indonesia
Iran
Malaysia
Pakistan
Philippines
Saudi Arabia
Thailand
Vietnam
0
10
20
30
40
50
60
70
80
90
$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
Kg per capita, 2014
GDP per capita, PPP basis 2014
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Investing through agricultural companies provides useful long-run exposure to the food theme
0
50
100
150
200
250
300
350
400
Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16
FOOD Index
MSCI World Index - local currency
FAO Food Price Index
Index = 100 30-June-2006
BetaShares Global Agriculture Companies ETF - Currency Hedged’s Underlying Index vs MSCI World & FAO Food
Price Index: June 2006 – June 2016
Source: Bloomberg. The Index which FOOD aims to track is the Nasdaq Global ex-Australia Global Agriculture Companies Hedged AUD Index. You cannot invest
directly in an index. Performance excludes the impact of ETF fees and expenses. Past performance is not an indication of future performance of the Index or the ETF.
Confidential – may not be distributed without the consent of BetaShares Capital 37
Healthcare: ASX - DRUG
38
Healthcare spend has increased significantly
Total Health Care Spending (% of GDP), current prices: 1970-2015
Source: OECD Health Statistics, June 2016
0
2
4
6
8
10
12
14
16
18
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
USA
UK
Japan
Germany
Australia
%
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39
Strong forecast growth in healthcare spending
Total Health Care Spending (% of GDP) by Country Income Level: Projections to 2040
Source: World Bank and Institute for Health Metrics.
0
2
4
6
8
10
12
1995 2013 2040(f)
Global High Income Upper-middle Lower-middle Low
%
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40
Performance of DRUG index historically strong v. MSCI World Index
Equity Total Return Performance: February 2009 – June 2016
Source: Bloomberg. The Index which DRUG aims to track is the Nasdaq Global ex-Australia Healthcare Hedged AUD Index. You cannot invest directly in an index.
Performance excludes the impact of ETF fees and expenses. Past performance is not an indication of future performance of the Index or the ETF.
0
50
100
150
200
250
300
350
400
450
500
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
DRUG Index
MSCI-World (local currency)
Index=100 31/01/07
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Some things to consider
• Market risk: Investment returns will be influenced by the fluctuations
of the relevant market as a whole (share market or currency market)
• Sector risk
• Concentration risk
• Investors should seek professional financial advice before investing
• Past performance is not an indication of future performance
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Questions?
Keep in touch
BetaShares Client Service
1300 487 577
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