Australian online broker and investment adviser SelfWealth has launched its first ETF with the introduction of a rules-based fund that mimics the holdings of Australia’s top-performing Self Managed Super Funds (SMSFs).
The fund invests primarily in S&P/ASX 200 securities that are commonly held by top-performing Australian SMSFs.
The SelfWealth SMSF Leaders ETF (SELF AU) has listed on the Australian Securities Exchange and comes with an expense ratio of 0.88%.
SMSFs are a distinct and unique class of investment fund. Their differentiating features include a general prohibition of the use of leverage and a requirement of trustees to invest capital for the sole purpose of providing for the retirement of its members.
According to SelfWealth, the above restrictions have created a group of investment funds with a uniquely mandated long-term investment horizon.
Methodology
The ETF is linked to the proprietary SelfWealth SMSF Leaders Index which is created by analyzing more than 80,000 SMSFs that focus on ASX-listed securities.
Each SMSF is assigned a performance score based on the fund’s performance relative to the S&P/ASX 200 Index over 1-month, 3-month, 6-month, 12-month, and annualized time frames. The 10% of SMSFs with the highest scores are selected.
The methodology then analyses the constituents of the selected SMSFs. REITs, LICs, LITs and ETFs are removed so as to focus the methodology on ASX-listed common stocks.
Securities that are not constituents of the S&P/ASX 200 or are not held by at least 45 SMSFs are also removed from the selection pool.
If the number of remaining eligible securities is between 25 and 75, they will be selected to make up the index constituents. If more than 75 securities are eligible, the methodology will select the 75 constituents with the largest market capitalizations.
If fewer than 25 securities remain, however, the methodology will relax the requirement of the number of eligible SMSFs to hold the security from 45 to 25. If fewer than 25 securities still remain, the requirement may be further relaxed at the discretion of the index committee.
Index constituents are equally weighted and reconstituted and rebalanced on a quarterly basis.
The fund has been launched in collaboration with ETF Securities Australia and has been seeded with A$100 million from ETF private equity outfit ETFS Capital.
SelfWealth has also scrapped the brokerage fees charged on the ETF if bought through its share trading platform.