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Equities

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Equities

  1. 1. EDUCATION CENTRE WEBINAR: ESSENTIALS OF ETFS
  2. 2. Agenda <ul><li>What are ETFs? </li></ul><ul><li>Benefits of ETFs </li></ul><ul><li>Portfolio Strategies </li></ul><ul><li>ETF industry overview </li></ul>
  3. 3. Best of both worlds <ul><li>Like an index fund … </li></ul><ul><ul><li>Constructed to reflect performance of a benchmark </li></ul></ul><ul><ul><li>Low management costs </li></ul></ul><ul><ul><li>Low turnover </li></ul></ul><ul><li>Like a share …. </li></ul><ul><ul><li>Trading flexibility intra-day on the exchange </li></ul></ul><ul><ul><li>Long or short </li></ul></ul>
  4. 4. Introducing ETFs <ul><li>Exchange traded funds (ETFs) are index funds, which are listed and traded on major stock exchanges around the world. </li></ul><ul><li>An ETF seeks to reflect the performance of a chosen index through holding a diversified underlying basket of assets. </li></ul>
  5. 5. Unique benefits of ETFs <ul><li>Precise access to markets </li></ul><ul><li>Diversification </li></ul><ul><li>Transparency: Price & holdings </li></ul><ul><li>Cost effectiveness </li></ul><ul><li>Trading: Multi-dealer </li></ul><ul><li>Portfolio strategies </li></ul>
  6. 6. Precise market access <ul><li>ETFs provide benchmark exposure </li></ul><ul><li>Access to variety of asset classes on-exchange, including less accessible, e.g. emerging markets </li></ul><ul><li>Continuous pricing during market hours provides competitive and fair pricing </li></ul>
  7. 7. Diversification <ul><li>Exposure to the underlying companies in an index </li></ul><ul><li>Reduces concentration risk </li></ul>
  8. 8. Transparency <ul><li>Know what you own </li></ul><ul><li>Manage costs </li></ul><ul><li>Manage portfolio risk </li></ul>* Broker fees may apply
  9. 9. Comparing Management Costs Japanese Market Equities Market Category iShares fund Universe of funds Emerging Market Equities US Market Equities Global Large Cap Equities Of the 15 Japanese Market Equity Funds, the average fee in Australia is 1.78% (ranging from 1.00% to 2.40%) Of the 54 Emerging Market Equity Funds, the average fee in Australia is 1.92% (ranging from 0.56% to 3.20%) Of the 12 US Equity Funds, the average fee in Australia is 1.92% (ranging from 0.65% to 2.64%) Of the 1,140 Global Market Equity Funds, the average fee in Australia is 1.89% (ranging from 0.19% to 4.79%) iShares MSCI Japan – management cost is 0.52% iShares MSCI Emerging Markets – management cost is 0.72% iShares S&P 500 – management cost is 0.09% iShares S&P Global 100 – management cost is 0.40% Management Costs for the iShares funds represent total fund management fees and expenses as a percentage of average net assets, and is equivalent in calculation to the indirect cost ratio (‘ICR’) and the management cost ratio (‘MER’). Analysis and table were prepared by BlackRock Asset Management Australia Limited using information provided by Morningstar Research Pty Limited (“Morningstar”). The information is as at 2 November 2009. Morningstar takes no responsibility for the analysis, the accuracy of the information or the way in which the information provided by them has been presented.
  10. 10. Trading could not be simpler <ul><li>Equity-like execution: </li></ul><ul><ul><li>Shares traded at any time on the ASX </li></ul></ul><ul><ul><li>Settle like listed shares </li></ul></ul><ul><ul><li>Buy and sell quickly even in market volatility </li></ul></ul>
  11. 11. Investment strategies using iShares Category Objective Strategy Build Strategic asset allocation Core/satellite Use broad based ETFs as core holdings and add single country or sector ETFs as satellites Alternative asset classes Use ETFs for exposure to difficult-to-access markets Adjust Active management Cash equitisation Invest extra cash in ETFs to maintain full market exposure, through management transitions or for portfolio completion Tactical rotation Can easily be applied among countries, styles and market cap Maintain Risk control Risk management Incorporating ETFs for index exposure or combining ETFs in managing total portfolio volatility, or duration adjustments in fixed-income portfolios
  12. 12. Building a portfolio c ore/satellite strategy Core - stay true to an asset allocation Satellites - pursue opportunities for outperformance Expected total return % Total risk % Core portfolio Core plus satellites
  13. 13. Growth of the global ETF industry Global ETF assets hit US$933 bn at the end of Q3 2009 Over 1,800 ETFs with over 3,200 listings 96 providers on 40 exchanges throughout the world Source: BlackRock ETF Landscape, Industry Preview, as at end Q3 2009
  14. 14. Agenda <ul><li>What are ETFs? </li></ul><ul><li>Benefits of ETFs </li></ul><ul><li>Portfolio Strategies </li></ul><ul><li>ETF industry overview </li></ul>
  15. 15. <ul><li>IMPORTANT INFORMATION </li></ul><ul><li>Before investing in an iShares fund, you should carefully consider the appropriateness of such products to your circumstances, read the Australian prospectus and consult an investment adviser. This information is general in nature and has been prepared without taking into account your objectives, financial situation or needs. </li></ul><ul><li>This information has been prepared by BlackRock Asset Management Australia Limited ABN 33 001 804 566, AFSL 225 398. BlackRock Asset Management Australia Limited is the local agent and intermediary for iShares (iShares, Inc. ARBN 125 632 279 formed in Maryland, USA; iShares Trust ARBN 125 632 411 organised in Delaware, USA. The liability of shareholders is limited. ). The information in this document relates to iShares funds quoted on the Australian Securities Exchange (“ASX”). Trades on ASX in the shares of an iShares fund are settled using CHESS Depositary Interests (or “CDIs&quot;). </li></ul><ul><li>BlackRock Fund Advisors serves as an advisor to the iShares funds that are registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940. BlackRock Asset Management Australia Limited and BlackRock Fund Advisors are wholly-owned subsidiaries of BlackRock, Inc. </li></ul><ul><li>International investments such as an iShares fund may have different risk characteristics compared to investments in other securities listed on the ASX that do not have international exposure. </li></ul><ul><li>Past performance is not a reliable indicator of future performance. </li></ul><ul><li>Shares of an iShares fund trade on an exchange at market price (not, net asset value (&quot;NAV&quot;)). Shares may only be redeemed directly from an iShares fund by persons or entities in the United States called 'Authorised Participants', in very large creation/redemption units. </li></ul><ul><li>The iShares funds are not sponsored, endorsed, issued, sold or promoted by MSCI, Inc. or Standard & Poor’s. </li></ul><ul><li>Transaction costs are incurred when buying or selling shares of a Fund on the ASX, and brokerage commissions if such trades are done through a broker. </li></ul><ul><li>The performance of an iShares fund is not guaranteed. </li></ul><ul><li>©2009 BlackRock Asset Management Australia Limited. All rights reserved. iShares® is a registered trademark of BlackRock, Inc. </li></ul><ul><li>Slide 9 - Cost Effectiveness: Management Costs comparisons </li></ul><ul><li>Each universe consists of retail and wholesale funds. All funds are “open” funds. Management Expense Ratio (&quot;MER&quot;) and Indirect Cost Ratio (&quot;ICR&quot;) figures have been incorporated into the above expense ratios. The universe of Japanese Market Equities is represented by the Morningstar Category Equity Japan. The universe of Emerging Market Equities is represented by the Morningstar Category Equity Emerging Markets. The universe of US Equities is represented by the Morningstar Category Equity North America. The universe of Global Market Equity funds is represented by those funds benchmarked to the MSCI World Ex-Australia. </li></ul><ul><li>©Morningstar Research Pty Ltd ABN 83 062 096 342, AFSL 243161. All rights reserved. To the extent that any of the content above constitutes advice, it is general advice that has been prepared by Morningstar, without reference to your objectives, financial situation or needs. Before acting on any advice, you should consider the appropriateness of the advice and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. If applicable, investors should obtain the relevant product disclosure statement and consider it before making any decision to invest. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.asp </li></ul><ul><li>Management Costs means total fund management fees and expenses as a percentage of average net assets, and is equivalent in calculation to the indirect cost ratio ('ICR') and the management expense ratio ('MER'). For the purposes of this analysis, both expenses and fees calculations are referred to as Management Cost or fee. Funds where no Management Cost/MER/ICR was provided were excluded from the analysis. The analysis does not take into account entry/exit fees or other transaction costs. </li></ul>

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