Betashares plans to launch first 'moderately geared' ETFs

Betashares is readying to launch Australia's first moderately geared ETFs on the ASX, as part of its new 'Wealth Builder' product suite.

The ETFs, which are expected to offer a gearing ratio of 30-40%, aim to allow investors to benefit from the long-term advantages of gearing in a more moderate way than existing ETFs.

The two initial funds are the Betashares Wealth Builder Australia 200 Geared (30-40% LVR) Complex ETF (G200) and Betashares Wealth Builder Diversified All Growth Geared (30-40% LVR) Complex ETF (GHHF).

G200 offers moderately geared exposure to the Australian sharemarket, while GHHF offers moderately geared exposure to an 'all-cap, all-world' share portfolio.

Sponsored by Macquarie Fixed income ETFs: The opportunity is now

"The Wealth Builder funds are internally geared, which means each fund enters into the borrowing arrangement itself, which ensures that investor risk is limited to the capital invested, with no possibility of margin calls for investors," Betashares said.

"Due to the structure of the funds, investors benefit from institutional interest rates that Betashares is able to access, which are typically significantly lower than those available to individual investors seeking to borrow in their own capacity.

"The two new funds represent a unique way for Australian investors and their financial advisers to seek to increase their market exposure, where the investor is comfortable with the higher risks associated with gearing."

These funds were said to be suitable for accumulator investors who have a longer investment horizon and wish to pursue a dollar cost averaging investment strategy.

Both funds have a moderate level of gearing and costs, which enables regular portfolio contributions to go further by increasing market exposure.

The new funds have a fee structure of 0.35% per annum of the fund's gross asset value.

Betashares chief executive Alex Vynokur said: "Utilising gearing is a well-established approach to building long-term wealth, but it has traditionally been expensive to access or used in funds that are only suitable for investors with a tolerance for higher gearing levels."

"The Wealth Builder series has been designed for investors who are comfortable with leverage but are seeking a more moderate level of gearing better suited to a 'buy and hold' investment strategy as part of their wealth accumulation goals.

"We are proud to continue to responsibly innovate and build out the range of portfolio tools available to investors and their financial advisers."

The two new funds are expected to begin trading on the ASX in late April.