Active ETF provider Pinnacle Investments is listing a legitimate zero fee cash ETF and a multi-asset income ETF that’s not zero fee at all.
Both funds will be managed by Omega Investments, a Melbourne-based asset manager. Pinnacle runs a Legg Mason-style multi-affiliate manager business.
Pinnacle aShares Dynamic Cash Fund (Managed Fund) (Z3RO)
Pinnacle aShares Global Dynamic Income Fund (SAVE)
SAVE tries to provide an annual income 4% above the RBA cash rate while providing modest capital growth. It invests in global equities and investment grade bonds, with exposure to any entity capped at 6%.
The fund will invest the majority of its assets in equities, the product disclosure statement indicates, while targeting short and mid-duration bonds. The fund will maintain hedged exposure to five currencies or more. SAVE charges a 0.65% fee.
Z3RO aims to provide a monthly income above the RBA cash rate. It aims to do this, in effect, by taking on more risk than cash: investing only 70% in cash and certificates of deposit while going 30% in on corporate paper and bonds. The fund charges a 0.00% management fee but passes on expense recoveries, which are capped at 0.15%.
Analysis – An ETF provider that’s done its market research
Australia is a small market, but an influential and rich one. This means asset management is competitive and hopeful ETF providers have to offer something genuinely different if they want a slice of pie. Today’s listings are an example of that.
Z3RO enters the crowded cash ETF market. But does so with two USPs: one, the active management; two the zero fee. The active management ensures that the outcome will be different from passive cash ETFs (for the better or worse). While the zero fee, Pinnacle says, works as a loss leader (and marketing device), cascading investor interest into other Pinnacle products.
SAVE is smart too. Multi-asset is one of the under-explored areas of product innovation. And income solutions are the right area to go drilling, as that’s where the guts of the money is.
If I were in Pinnacle’s position I don’t see what I’d have done differently.
Image: Pinnacle team; Source: supplied