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Australian-owned sector ETF provider, Australian Index Investments (Aii), believes that with the increase in energy costs worldwide that it might be time for investors to tilt their portfolios towards this growth sector.

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“There are some views in the marketplace that oil stock prices have not yet translated into more widespread gains on the ASX, and importantly, with a basic underlying energy shortage, global demand from economic hotspots like China and India, along with civil unrest in other developing economies suggests that triple digit, long-term oil prices are here to stay,” said Annmaree Varelas, CEO of Aii.

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“The Aii Energy ETF is based on an index of 22 stocks including oil majors such as Woodside Petroleum, Origin Energy, Santos and Oil Search.  Interestingly, the sector ETF does not just include oil producers but also offers exposure to explorers and service companies supplying the energy industry,” said Ms Varelas.
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The beauty of investing in a sector ETF is that investors can take a macro view on the energy sector and not worry about trying to pick winners and more importantly, avoiding the losers.

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“On average, over 80% of the return that the investor generally receives for a stock comes from general market and sector returns, and only 10%-20% of the return actually comes from the attractiveness of the stock. As such, if you can take a macro approach to investing by getting the market and sector right, then you are 80% of the way there,” said Ms Varelas.

Energy Sector Outperforms



Source: Iress complied by Australian Index Investments

Product Information

• Aii S&P/ASX 200 Energy ETF
• ASX Code: ENY
• MER: 0.43%
• Number of holdings: 22
• Top 10 holdings: Woodside, Origin, Santos, Oil Search, Worley Parsons, Paladin Energy, Riverdale Mining, Caltex, Whitehaven Coal, Aquila Resources

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The current range of Aii Sector ETFs includes:

The post Triple digit oil prices are here to stay – energy sector to benefit appeared first on AdviserVoice.

Sector ETFs buy the sector, rather than the individual stocks, and gain an appropriately weighted interest in all the securities within that particular index.

Australian Index Investments (Aii) is the first to offer sector ETFs in Australia and has six sector ETFs covering the financial, mining, industrial, resources and energy sectors.

ETF investment strategies to suit every type of investor

“Strategy-based ETFs, such as our Sector ETFs, give investors and their advisers more flexibility to work on more opportunistic/active strategies for creating wealth. At Aii, we are seeing increased adviser demand for a broader use of ETF strategies,” said Annmaree Varelas, CEO, Australian Index Investments.

Sector ETFs can be used as a passive buy & hold when taking a medium to long term view on a particular sector with a view to outperforming the broader market.

Alternatively, advisers could look to implement a core/satellite portfolio (with sector ETFs as the satellite investments) with the aim to generate additional alpha within your existing portfolio.

Sector ETFs can also work well as a passive product that is actively managed within a portfolio by implementing a sector rotation strategy.  This allows an investor to have several strategies in play at once:

•    Buy a sector on its upswing, thus capturing its potential for capital growth upside
•    Sell a sector on the start of a downswing to take profits and reinvest those profits in another sector that is on an upswing
•    Alternatively, you could keep a portion of the investment in the sector that is tracking down to maintain some defensive exposure

Costs

With a sector ETF, the only costs are initial brokerage and an MER of 0.43% p.a. with a tax statement provided at the end of the financial year.

The post Sector ETFs Take ETF Strategies to a More Active Level Including Core/Satellite and Sector Rotation Strategies appeared first on AdviserVoice.

 ‘By investing in a sector ETF, as opposed to an individual security, investors are minimising stock specific risk, yet still receiving all the benefits of investing directly in the underlying securities. Benefits such as any capital appreciation, dividends and any associated franking credits coming directly to them and not being diluted in a managed fund,” said Annmaree Varelas, CEO, Australian Index Investments. 

 Australian Index Investments (Aii), an independent Australian Investment Manager, listed a series of six sector ETFs in early 2010 tracking the following market indices:

•  Aii S&P/ASX 200 Financials (ASX code: FIN)
• Aii S&P/ASX 200 Financials x-A-REITs (FIX)
• Aii S&P/ASX 200 Resources (RSR)
• Aii S&P/ASX 300 Metals & Mining (MAM)
• Aii S&P/ASX 200 Energy (ENY)
• Aii S&P/ASX 200 Industrials (IDD)

 SMSFs

More sophisticated or aspiring investors are starting SMSFs and a lot of ETF growth is coming from SMSF trustees.

 The ATO estimates that around 60% of SMSF assets are invested in direct Australian shares and liquid assets (cash and term deposits). The ATO also estimated that 20% of assets are invested in “managed investments”, 6% of which are listed managed investments including ETFs.

 “Based on similar experiences overseas, Australia is on the cusp of a massive growth curve for ETFs, with the market set to climb from $3b FUM to $25b over the next 7-8 years. Some of the reasons for this include investor desire for low cost, transparent and liquid investment products (thanks to the GFC).

 “Also, there is a clear move away from commissions to fee-for-service and the fact that ETFs are one of the few ways that an SMSF trustee can gear Australian equities within their fund,” said Ms Varelas.

 Costs

ETFs trade like a share, so brokerage will be incurred when a parcel of ETFs is bought and sold. Other than that, the only other cost is an annualised MER of 0.43% for each fund.

The post SMSF Use of Sector ETFs Likely to Follow the Success of Broader Passive Investments appeared first on AdviserVoice.