The fund manager’s new “Wealth Builder” range will comprise two “moderately geared” ETFs, anticipated to provide a gearing ratio between 30 to 40 per cent on a given day.
The Betashares Wealth Builder Australia 200 Geared Complex ETF will provide moderately geared exposure to the returns of the broad Australian sharemarket while the Betashares Wealth Builder Diversified All Growth Geared Complex ETF will provide moderately geared exposure to the returns of an “all-cap, all-world” share portfolio.
According to the fund manager, these will mark Australia’s first such geared ETFs on the ASX, and will have a “competitive” fee structure of 0.35 per cent per annum of the fund’s gross asset value.
“Utilising gearing is a well-established approach to building long-term wealth, but it has traditionally been expensive to access or used in funds that are only suitable for investors with a tolerance for higher gearing levels,” said Betashares chief executive Alex Vynokur.
“The Wealth Builder series has been designed for investors who are comfortable with leverage but are seeking a more moderate level of gearing better suited to a ‘buy and hold’ investment strategy as part of their wealth accumulation goals.”
Internally geared, each fund enters into the borrowing arrangement itself, which ensures investor risk is limited to the capital invested, with no possibility of margin calls for investors.
They represent a “unique way” for Australian investors to increase their market exposure, where the investor is comfortable with the higher risks associated with gearing, Betashares said.
Additionally, due to the structure of the funds, investors benefit from institutional interest rates that Betashares is able to access, which are typically significantly lower than those available to individual investors seeking to borrow in their own capacity.
The fund manager flagged that the two offerings may be well suited for investors seeking to build long-term wealth, who are comfortable taking on the increased risk of gearing, and could be a convenient way for self-managed super funds (SMSFs) that have reached the concessional contribution cap to increase their exposure to the Australian or global sharemarket.
Moreover, the funds can be used in combination with dollar cost averaging as a strategy to potentially accelerate long-term wealth creation.
This follows the launch of two new Betashares Nasdaq funds, Nasdaq Next Gen 100 ETF and Nasdaq 100 Equal Weight ETF, on the ASX last month, shortly after its flagship equities funds, Betashares Australia 200 ETF and the Betashares Nasdaq 100 ETF, both surpassed $4 billion in funds under management during January after collectively receiving $1.4 billion in net flows over 2023.
