How safe are my ETF assets?

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ETFs in Australia are regulated by the Australian Securities and Investments Commission (“ASIC”) as registered “managed investment schemes” (“MIS”) which means ETF issuers are governed by a detailed and strict set of regulations regarding the management of assets. To understand how safe ETF assets are, we need to understand the MIS rules – the laws which apply not only to ETFs but also to most traditional managed funds, and the fund’s constitution or governing rules.

A strict set of standards

MIS rules impose strict controls on what the fund provider can do with the MIS assets including only being able to buy and sell assets in accordance with the investment rules set out in the fund’s constitution and Product Disclosure Statement (“PDS”).

As an investor, this means once your money has been deposited to the investment manager, it can only be used for the specific purpose outlined in the PDS.


Who owns the Assets in my ETF?

Who owns the Assets in my ETF?

All ETFs in Australia utilise a structure where each investor owns “units” which give an ownership share in the overall assets held by the fund. These ETF units are issued by a “unit trust”, which holds the assets of the fund on trust for investors. The structure used for ETFs is the same structure used by most traditional managed funds in Australia.

First, some jargon explained. When an asset is held “on trust”, it means there is a “trustee” of the asset, ie an entity that administers the assets on behalf of others, and a “beneficiary,” ie the person or entity on whose behalf the asset is held – ordinarily the investor.


ETFs 101: Understanding ETF Bid and Offer Spreads

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Among the issues investors need to consider when buying and selling exchange traded funds (ETFs) are buy and sell spreads. Spreads are often seen as an unavoidable cost of trading and investing, and are not unique to ETFs per se.  What’s more, the competitive nature of open exchange markets – as well as the impact of dedicated market makers – help to ensure ETF bid-offer spreads are as tight as possible.


Market Insights: Local equities still at the mercy of commodities

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The Australian equity market has faced significant hurdles over the past year or so, with none more challenging than the sharp slump in export commodity prices.  The challenge for the market in the coming year is that analysts still expect a sharp turnaround in resource sector earnings, which may be difficult to achieve if commodity prices remain low.