Clever Copycat


Clever VanEck catches Vanguard Australia asleep at the wheel

In a stroke of genius piece of product innovation, VanEck Australia is rolling out an international REIT ETF that almost perfectly copies the wholesale index fund of one of its top competitors: Vanguard.

The VanEck Vectors FTSE International Property (Hedged) ETF (REIT) will offer an ETF version of the $1.2B Vanguard International Property Securities Index Fund (Hedged). Vanguard Australia has failed to offer an ETF share class of its wholesale fund. 

VanEck’s new listing will track the same index: the FTSE EPRA Nareit Developed ex Australia Rental Index AUD Hedged. And charge the same management fee: 0.43%. From what we can tell at this stage, the only difference is that one is an ETF while the other is a wholesale fund. (And the different companies issuing them).

The fund is the second international REIT ETF to hit the ASX and will compete with State Street’s $285M DJRE.

Analysis – will Vanguard respond?

Listing an international REIT ETF at this moment in time makes a lot of sense. Aussie investors are attracted to property as inevitably as a bear is attracted to honey. And with the Sydney-Melbourne property bubble winding down, investors are looking to diversify their property exposures beyond the home market. While State Street’s DJRE provides this type of exposure, it does so at a steep 0.50% fee and currently runs against no competition.

As far as copycat products go, this is a very clever one. But the danger here of course is that Vanguard responds and simply lists an ETF version of its wholesale fund and at a lower price. However if VanEck can crunch the concrete and sell this product early, they may just meaningfully seize first mover advantage (and the liquidity snowball that comes with it).  

Investors considering this listing should remember that REITs are already captured in the total market. When you buy a global or S&P 500 ETF, a good chunk of its weight is in REITs. Adding more REITs is therefore a sector bet and adds diversifiable risk. 


JPMorgan builds two more BetaBuilders

JPMorgan is widening out its ETF offering listing in the US, listing two more cheap broad market trackers.  

  • JPMorgan BetaBuilders 1–5 Year U.S. Aggregate Bond ETF  (BBAB)
  • JPMorgan BetaBuilders US Equity ETF (BBUS)

BBAB will track the Bloomberg Barclays Short-Term US Aggregate Bond Index, which measures the performance of US dollar denominated investment grade taxable bonds with remaining effective maturities between one and five years.

The index includes US Treasury bonds, government-related bonds. investment-grade corporate bonds, mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities, and US dollar denominated emerging market bonds. The exposure to mortgages is limited to originally issued 15-year mortgages.

BBUS – which will be rolled out in Europe shortly – will track the Morningstar US Target Market Exposure Index. As with other BetaBuilder equity products (i.e. BBEU and BBJP), the fund will be an ultra-cheap plain vanilla beta product. We are unsure how much it will cost exactly at this stage. However if JPMAM wants to be competitive in this space it will have to charge a single basis point.

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