Arian Neiron

Van Eck Global is pleased to announce that the Market Vectors Small Cap Dividend Payers ETF (ASX code: MVS) has jumped to more than $25m in its first few days of trading following buying for their managed accounts by the specialist ETF strategist Implemented Portfolios.

Launched on 28 May 2015, MVS is the first ETF in Australia that includes only the most liquid ASX listed small companies and only those that have paid their most recent dividend. It also has one of the lowest management fees among both active and passive strategies in the market.

Arian Neiron, Managing Director, Van Eck Global Australia, said: “The investment  by one of Australia’s largest ETF clients confirms our belief that MVS will have broad appeal for investors looking for a liquid, transparent and diversified small company portfolio. The index MVS tracks is able to demonstrate outperformance against the S&P/ASX Small Ordinaries Index.  Now Australian investors have a low cost small company investment alternative to actively managed funds.

“Market Vectors Index Solutions have been able to develop an index which exclusively selects dividend paying companies in the asset class and seeks to reduce risk by focusing on only the most liquid stocks. This approach provides an ideal portfolio solution for investors that are seeking to benefit from the growth potential of small companies at significantly lower costs than active management,” said Mr Neiron.

Jon Reilly, Chief Investment Officer, Implemented Portfolios, said: “We welcome this innovative approach to indexing small cap equities in Australia, an area that we believe was overdue for a non-market cap weighted, investable index and accompanying ETF. Our long term forecasting has shown good value in this part of the market and we were attracted to the more focused exposure that the Small Cap Dividend Payers ETF provides. On a broader note, it is also pleasing to observe the ongoing development and growth in Australian ETFs, providing ETF Strategist managers like Implemented Portfolios an increasing range of options with which to construct better client portfolios.“

MVS tracks an innovative index which has outperformed with reduced volatility relative to the S&P/ASX Small Ordinaries Accumulation Index over the last five years.

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Implemented Portfolios is a portfolio construction service for advisers which creates balanced portfolios using ETFs for sector exposure but focussing on asset allocation for investor protection and capital growth.

In the most recent update by the Asset Allocation and Investment Committee (AAIC), the defensive positioning strategy for its five model portfolios was affirmed as developed markets continue to face uncertainty and growth outlooks appear subdued at best. However, the neutral stance on Australian equities has been increased to overweight reflecting better valuations. This results in the overweight position in income securities being pared back slightly, while the zero allocation to listed property remains across all of Implemented Portfolios’ IMAs .

Providing further context on the positions, AAIC member Jon Reilly said despite recent volatility in commodity prices, fundamentals are expected to continue to be supportive of the resources sector, while the decline in bank share prices over the last couple of months provides an attractive yield to support future performance. On balance the AAIC is optimistic towards Australian equities on a long term basis.

“We will be looking to take advantage of any short term dips to add exposure to growth assets at good prices,” Mr Reilly said.

Over the last two quarters the committee viewed A-REITs as fully priced at best, if not expensive. This assessment has been revised in Q2 with the AAIC commenting values are returning to more reasonable levels. Despite this, the committee is maintaining its 100% underweight target position to listed property because current upside potential is not sufficiently compelling and the local sector is dominated by retail which is facing a very difficult environment.

According to Reilly, “The AAIC’s decisions this quarter reflect our cautious outlook. The remainder of the year is likely to be characterised by ongoing sluggish economic growth in the developed world which has the potential to be exacerbated by political and regulatory responses to debt problems in Europe and budget and debt ceiling negotiations in the US.

“As a result, we have positioned the portfolios defensively but will add to equities allocations when valuations become more attractive. We believe this is the best approach to ensure investors avoid disasters and protect their capital,” he concluded.

The AAIC is comprised of a team of professional managers that make implementation and investment decisions for Implemented Portfolio’s range of individually managed accounts.

The quarterly update is the AAIC’s long term assessment of each asset class amid the broader context of the economic environment and investment markets.

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