Global X has lodged its Global X Australia 300 ETF (ticker: A300) with the ASX, and while trading has not yet commenced, its successful navigation of the ASX’s rigorous listing process indicates the firm could be moving ahead with the launch.
While Global X wasn’t able to confirm if it was going ahead with the launch or not, Marc Jocum, investment strategy and research manager at Global X, said that generally speaking, the firm is looking to expand its remit.
Currently, Global X exchange-traded funds (ETF) are primarily used for “small satellite positions”, but with the ETF industry continuing to grow – hitting a record $19 billion in year-to-date inflows – the firm is looking to capitalise on rising demand for low-cost core portfolio solutions.
“We lead in innovative solutions such as thematic and smart solutions that are best in class when it comes to research capabilities,” Jocum said.
“We do want to expand into lower cost, core exposures, that serve a broader set of Australian investors. I think the whole idea behind that is we just want to be more relevant in portfolios.”
While Jocum couldn’t comment on A300 directly, his comments did suggest Global X is aiming to expand into more “vanilla” and cost-effective strategies to meet growing investor demand for core ETF holdings.
The name Global X has registered with the ASX suggests that, if launched, the new ETF would track the ASX 300 – making it a largely “vanilla” product and positioning it in direct competition with Vanguard’s Australian Shares Index ETF (VAS).
Vanguard’s product is also widely considered to be a favourite among Aussie investors, with the ETF recently surpassing $20 billion in funds under management – solidifying its position as the country’s largest ETF.
In a statement on Wednesday, Vanguard’s managing director, Daniel Shrimski, said: “The growth of VAS reflects the increasing confidence Australian investors have in index investing and the Vanguard approach.
“Vanguard’s mission is to give investors the best chance for investment success. We’re incredibly proud to see Australians embrace that mission through our market-leading ETFs and managed funds as well as our low-fee superannuation offer.”
Launched in 2009, VAS provides investors with exposure to the top 300 companies listed on the Australian Stock Exchange (ASX) for a fee of just 0.07 per cent – with the fee reduced over time to now sit less than half the rate it was at the start of 2017 (0.15 per cent).
Vanguard is able to offer VAS at an ultra-low fee thanks to its securities lending program, which generates income by lending out the fund’s securities and passing nearly all of it back to investors – effectively offsetting much of the management cost.
InvestorDaily has learnt that securities lending yields on VAS have hovered around 5 basis points over the past few years – more than half of VAS’ current management fee, meaning securities lending income effectively offsets just under 80 per cent of the fee.
According to the firm’s website: “Vanguard funds and ETFs have used securities lending to offset a significant portion of their expense ratios – between 23 per cent and 90 per cent on average – which helps reduce the effective cost of fund ownership and helps give our investors the best chance for investment success.”
Also working in VAS’ favour is its association with the global index investing movement spearheaded by Vanguard founder Jack Bogle, a pioneer in low-cost investing and a widely admired figure among long-term investors.
“His vision was to give investors a fair go – and that legacy lives on in VAS,” Shrimski said.
Global X wants to ‘touch more Australians’
Global X’s strategy moving forward is to “touch more Australians” by adopting a “barbell” approach – combining its investment research capabilities and innovative thematic ETFs with core, low-cost solutions suitable for inclusion in model portfolios.
“It’s a kind of blended approach,” Jocum said. “That’s where we want to head to because we want to become a leading ETF issuer and a premier ETF issuer. So, whilst I can’t confirm exactly what we’re launching, there will be a bit more of a shift in terms of looking more at the low cost, core space whilst also being true to label and what we’re known for.”
InvestorDaily has also uncovered ASIC records showing that Global X has registered the Global X S&P Australia GARP ETF – a core-oriented strategy that complements its existing S&P World ex Australia GARP ETF. While not strictly “vanilla”, this further signals the firm’s shift towards core portfolio solutions with a growth-at-a-reasonable-price (GARP) focus.
