Cool...thanks for that blackap...i didn't think about the marketmaker making their profit from the spread,makes sense now.I take it that they are normally brokage firms that act as the marketmaker?
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There's a lot of interesting research from the behavioural economics field looking into this issue. Apparently you have to consider the environment you're investing into and act accordingly.
So.. currently if most of the global capital is actively managed (and you assume assets are correctly priced) you can safely free ride off the collective research through your low cost ETF.
If however you wake up in an environment where most of the global capital was invested passively you might want to start paying someone to research the market and locate opportunities.
For example a passive fund would just allocate funds based on the underlying index, so if Enron is 2% of the market 2% of the capital would be invested in Enron. Basically no one is checking to see if any of the companies are a massive fraud!
I see FNZ is listed in ANZ Securities trading site & if I click on BUY I have the option to purchase.
My question is, if I was to buy via ANZ Securities how do they collect the fund management fees from me? Do I get a billed for the entry fee as well as paying brokerage?
There is no entry fee if you purchase an ETF online. Just the brokerage. (Which one could argue is a substitute for an entry fee). Do FNZ have an entry fee if you buy units through the NZX? I thought an application was totally fee less last I checked? So its probably cheaper buying through the provider but you have to pay now and wait till they allocate your stock which I believe is done once a month.
Thanks blackcap
Hi Icyfire, thanks for your reply. One that pops to mind is PGW, last year you could pick them up for .40, that would give you a 10% dividend and today they are .55. No I hadn't taken into the account the risk of investing in one company. Which yes is a risk, and I see the advantages of the smart shares to diversify to reduce this risk.
Hi from Dean at Smartshares,
It is great to see the level of knowledge on Smartshares ETFs in this forum. We thought it might be helpful to confirm a few of the comments for you and highlight the difference between buying units on market vs investing with Smartshares directly.
Buying on market
Your trade will occur on market at the time of your order and the price paid will depend on current supply and demand. Noting though that there is a market maker in place providing buy and sell prices for each Smartshares ETF at spreads around the NTA value. This is a third party market maker.
There will likely be a brokerage cost with the trade and this will be set by the broker you elect to use.
Buying direct from Smartshares
We pool applications on a monthly basis with all approved online applicants having their application amount direct debited on the 20th of the month.
Units will be issued on or about the last business day of the month at closing price.
The units will appear in your registry account on or about the 3rd business day of the following month.
Our application fees are as follows:
· Initial $30 fee for a new fund investment
· There are no application fees on any further investments into a fund you already hold units in, or for the regular savings plan function we offer. The regular savings plan allows you to invest in any ETF from as little as $50 a month with no transaction fees.
Management fees
There was also a question on how the management fees are paid. Management fees are the same regardless of whether you buy on market or via Smartshares directly.
Management fees for the funds are deducted on a daily basis and reflected within the NTA price. Therefore, there is no physical payment required from an investor as the unit values already reflect the reduction of the fees.
Ongoing management fees for the various funds can be found at: http://smartshares.co.nz/fund-investor-report
This may be a dumb question, but how is the management fee calculated? For example the "Fund Fee" on FNZ is 0.5%. Is this .5% of total assets, growth?
Do you disclose this fee anywhere? I couldn't seem to find it. It certainly doesn't appear on your fees page http://smartshares.co.nz/benefits#lower-fees
Hi Banksie,
The management fee is calculated daily on the total asset value. For details of the fees, including the $30 application fee, please refer to section 5 on page 16 of our Product Disclosure Statement.