BetaShares launches Australian Dividend Harvester Fund for the SMSF and Retiree market
Alex Vynokur
BetaShares, a leading provider of Australian exchange traded products (ETPs), yesterday announced the launch of a fund developed specifically with the needs of SMSFs and retirees in mind. The BetaShares Australian Dividend Harvester Fund (managed fund), will trade under the ASX code “HVST”.
The Fund‘s “dividend harvest” strategy seeks to maximise exposure to large capitalisation dividend paying Australian shares, aimed at delivering a tax-effective monthly income stream that is at least double the annual income yield of the Australian sharemarket. The portfolio will be regularly rebalanced to obtain exposure to securities that have been actively screened for high levels of dividends and franking within the next rebalance period. In addition, the fund employs a risk management strategy which aims to reduce the volatility of equity investment returns and defend the portfolio against the risk of significant losses.
Alex Vynokur, Managing Director of BetaShares, said the launch of HVST comes in response to rising demand from SMSFs and retirees for an investment that seeks to provide a strong income stream, but also addresses the risk of significant drawdowns inherent in holding equities exposures. These themes form the basis of a forthcoming whitepaper from BetaShares addressing the challenges of investing for retirement.
“Average retirement age in Australia today is around 62, but our current life expectancy is 80 for men and 84 for women,” said Mr Vynokur. “This leaves retirees with the challenge of determining how best to manage their nest egg for another 20-30 years following retirement – if they invest too cautiously they may run out of money too early, while if they are too aggressive they risk exposure to significant losses in a market decline which could dramatically affect the quality of life in retirement.”
Mr Vynokur said HVST had been designed to address these specific challenges, providing the potential for attractive, monthly tax-effective income for investor portfolios while reducing volatility of equity returns and reducing the risks of significant drawdowns.
“We believe the launch of the Australian Dividend Harvester is a compelling offering for SMSFs, retirees and investors who are seeking attractive income, but who may be concerned by the uncertain nature of financial markets,” said Mr Vynokur. “In addition, the fund provides investors the opportunity to earn high levels of franked dividends, which can boost the overall income return significantly, particularly for investors on lower tax rates, such as SMSF investors, or tax-exempt investors such as those in the pension stage.”
To provide investors with a smoother investment ride, HVST incorporates a risk management strategy. This involves monitoring the volatility of equities daily and, if risk levels rise, applying a ‘handbrake’ by selling ASX SPI 200 future to reduce risk in the portfolio. The risk management strategy employed by the Harvester Fund is being run in conjunction with Milliman, one of the largest institutional global risk managers in the world. According to Milliman, the risk management strategy aims, over market cycles, to provide most of the upside in rising markets while avoiding most of the downside in periods of decline.
“HVST provides investors with access to a risk management strategy commonly used by institutional managers, in a cost effective and simple way,” said Mr Vynokur. “While equity income strategies have been exceedingly popular amongst investors during 2014, many existing products do not include a strategy for reducing volatility and downside risk.”
“With the potential for attractive yield and tax efficiency benefits along with significantly reduced volatility in changing market conditions, we believe that HVST will become a key investment tool for advisers looking after SMSFs and retiree clients when planning for the investment challenges ahead.” Mr Vynokur concluded.
