Australia’s first and only free ETF has been forced to close, as it struggled to generate investor interest.
The Pinnacle aShares Dynamic Cash Fund Managed Fund (Z3RO) was launched in August 2019. It aimed to give Aussies a better deal on their cash while charging no management fee.
However Z3RO was wound up last month – after just a ten-month run-time. While ETF closures are common, Pinnacle’s decision is unusual in that the fund was given a very short runway.
According to Chris Meyer, boss of ETFs at Pinnacle, the closure of Z3RO mostly owed to declining interest rates.
“As a result of the sharp fall in interest rates in the last year, cash is no longer seen as an investable asset class, only a parking spot for market timing other assets classes like equities. As a result, investors care less about the yield and fees on their cash even if they can do better with new products and just go for the incumbents,” he said.
Over the lifetime of Z3RO, the assets under management at the two biggest cash ETFs – BetaShares AAA and iShares BILL – also fell. This meant that over the period, Z3RO was not the only cash ETF to struggle to attract assets.
However both AAA and BILL came storming back in June and attracted record assets, shortly after Z3RO announced its intention to close.
Z3RO also struggled to convince investors that the fund was truly free.
According to sources spoken to by ETF Stream, investors that looked at the fund were sceptical that Z3RO was free. This was partly because the fund – while charging no management fee – passed on its operating costs. These operating costs included the exchange fees charged by the ASX and share registry fees.
Passing on these costs is common practice and all ETFs do it. Pinnacle – correctly – stressed that these costs would fall as the fund scaled. But Pinnacle struggled to disarm the scepticism.
Management Fees (% p.a.)Recoverable Expenses (% p.a.)Indirect CostsBetaShares Australian High Interest Cash ETF (AAA)0.1800iShares Core Cash ETF (BILL)0.0700Pinnacle aShares Dynamic Cash Fund Managed Fund (Z3RO)00.150