ETF monthly wrap-up
Christine St Anne  |  30/10/2012Text size  Decrease  Increase  |  

Christine St Anne: In this month's exchange traded fund or ETF wrap up. I'm joined by Alex Prineas, who talks to us about how the products have performed and the new product from UBS.

Alex welcome.

Alex Prineas: Thanks, Christine.

St Anne: Alex, so, what were the best performing ETFs in the month of September?

Prineas: The best performing ETFs were mostly commodity related. So, we saw an announcement of policy from the US Federal Reserve. It's been dubbed QE-Infinity. It's basically a commitment to continue the policy of quantitative easing indefinitely.

So, that has all sorts of repercussions some of which have do with possibly debasing the US dollar and so precious metal ETFs were popular in September. So, we saw things like ETFS Physical Silver was up more than 12 per cent and we also saw strong runs from the ETFS Physical Platinum and BetaShares gold bullion.

There were also some industrial and energy products that also did well. So, ETFS Natural Gas and ETFS Industrial Commodities ETF were both up more than 10 per cent each. The only non-commodity related ETF that performed strongly although it was in the top 10 over the month was iShares MSCI Hong Kong product, but we know that the Hong Kong dollar is pegged to the US dollar. So, when you get an announcement quantitative easing, you can't say a liquidity injection into Hong Kong, so that may have been related.

St Anne: The not so good performers?

Prineas: Well, funnily enough, the worst performing ETFs were also commodity related products and I think that highlights in the short run, the commodity complex doesn't necessarily move in unison, but the worst performing products were more agricultural or oil related. So, we saw ETFS Agriculture and BetaShares Crude Oil both down around 5 per cent. Oil prices were limited during the month by an oil production pledge from Saudi Arabia and then it wasn't surprising to see some weakness in agricultural commodity prices. They had a very strong run in the previous few months on the back of the U.S. drought.

I guess commodity prices can be volatile and they can also be un-correlated to other asset classes they can be affected by things like crop yields, the weather, political decisions. So we often see commodity related ETFs at the top or bottom of performance tables in the short run and this month they dominated both the top and the bottom of the tables.

St Anne: Alex, UBS has recently launched a new ETF product. Can you give us an insight into this product and how it differs from the existing ETFs out there in the market?

Prineas: Yeah, the UBS product is an interesting one and it's based on buy ratings from UBS's fundamental equity research team. They have some quality filters overlaid, so you end up with a 40 stock portfolio. But ultimately I guess you could say it is a rules based ETF, but those rules are based on an underlying group of equity investors looking for attractive stocks.

So, UBS can't market it as an active ETF, because the regulation in Australia doesn't allow that. But essentially it is an ETF with an active stock selection component to it or a listed fund, I guess you could call it. The pricing also suggests that that's where it's pitched with a fee of 0.7 per cent. Looks quite expensive if you compare it to passive or index based ETFs. But if you compare it to an actively managed fund, say your average Australian shares, unit trust or super fund, the pricing looks more competitive. So, UBS's product is an interesting development. It's an example of the lines being blurred between ETFs and actively managed unit trusts or funds.

St Anne: Alex, thanks so much for your insights today.

Prineas: Thanks Christine.

Video Archive...

to Morningstar Premium Membership

BHP, Wesfarmers and investor returns
22/08/2014  Morningstar's Peter Warnes takes a look at the latest results from BHP Billiton, QBE Insurance, as well as a "shareholder's dream," Wesfarmers.
CBA stands out, Telstra gives back cash
15/08/2014  Morningstar's Peter Warnes takes a look at the latest earnings results from the likes of Commonwealth Bank, CSL, Telstra and ANZ, and gives investors an idea of what to expect from these companies going forward.
2 energy stocks with strong returns
08/08/2014  These two Australian energy companies should see strong returns over the next decade.
This wide-moat stock has been a star performer
05/08/2014  With its record of high profitability and very strong shareholder returns, this banking firm stands out.
How diversified is your portfolio?
31/07/2014  Morningstar’s Tim Murphy talks about an effective investment tool that helps investors achieve a diversified portfolio.
Seeking small-cap opportunities
30/07/2014  Morningstar's Tom Whitelaw shares some insights gained from recent talks with small-cap fund managers and provides some tips for those looking to increase their exposure to the smaller end of the market.
Key insights into quality stock-pickers
31/07/2014  Morningstar’s Julian Robertson talks about recent research into Australian large-cap managers and how some quality managers are approaching the market.
7 reasons why SMSFs outperform
22/07/2014  The key advantages to running a self-managed superannuation funds have also translated into strong performance.
Top investment prospects in 2014
16/07/2014  Morningstar's Peter Warnes explores the key issues, trends, risks and opportunities that lay ahead for investors over the next year.
What the advice reforms mean for SMSFs
09/07/2014  SPAA’s Graeme Colley outlines what SMSF trustees need to do to ensure the advice they are getting complies with the government’s proposed reforms.
Woodside, Santos in solid position
02/07/2014  Morningstar's Mark Taylor shares his views on future global energy demand and explains why Australia's major gas companies are well-positioned to benefit from favourable market dynamics.
Stockland poised for growth
30/06/2014  Stockland’s managing director Mark Steinert outlines the company’s growth strategy and gives his outlook for the housing sector.
Quality emerging-markets investments
25/06/2014  Morningstar fund research analyst Alex Prineas equips investors with what they need to know when it comes to getting quality exposure to emerging markets.
Quality emerging-markets investments
25/06/2014  Morningstar fund research analyst Alex Prineas equips investors with what they need to know when it comes to getting quality exposure to emerging markets.
Giving investors access to the world
19/06/2014  By investing in companies outside the banking and resources sector, investors can get a diversified portfolio that will perform across a variety of market cycles.
Emerging investment opportunities
16/06/2014  Ibbotson’s Daniel Needham talks about the need to confront existing investment thinking in order to improve investment outcomes for investors.
Maximise quality, minimise risk
11/06/2014  Morningstar's Mathew Hodge shares some insights into the portfolio construction process, as well as the role of stewardship in stock selection.
Reliable growth from property
04/06/2014  AMP Capital's Wholesale Australian Property Fund aims to provide SMSF trustees with both reliable income and some steady capital growth.
A tax date with your SMSF
02/06/2014  SPAA's Graeme Colley outlines a number of important dates for tax payers as the 30 June deadline looms.
Finding value in a bull market
29/05/2014  Perpetual’s Matt Williams talks about where he is finding the opportunities and the growth outlook for the market.