An Active Exchange Traded Fund (ETF) or ETMF (Exchange Traded Managed Fund) is an investment product where the underlying securities are ‘actively’ managed by a portfolio manager with an aim of outperforming the market. An Active ETF is quoted on the ASX and trades like a stock on an exchange.
A style of investment management that seeks to attain returns above a set benchmark by constantly monitoring and if necessary changing asset allocation and security selection. This is a contrasting approach to index management, where a manager will buy, sell and hold securities in order to replicate characteristics of an index.
The excess return of the portfolio relative to the return of the benchmark index is a fund's alpha.
A trade that attempts to profit from differences in the price of identical or similar financial instruments, on different markets or in different forms, usually by buying one asset and selling the other. Arbitrage exists as a result of market inefficiencies and provides a mechanism to ensure that prices do not deviate substantially from fair value for long periods of time.
The geometric average return earned by an investment each year over a given time period. It is based on performance periods of length greater than or equal to one year.
Market for the trading of products that can be quoted under the AQUA Rules. Products are third-party issued products that give investors exposure to an underlying asset or set of assets, but where the value of the assets is not under the control of the issuer. The value of the product is linked to the performance of the underlying assets rather than the financial performance of the issuer itself.
An asset allocation aims to balance risk and reward by apportioning assets to achieve an investment's objectives. The process of selecting a long-term target asset allocation is called strategic asset allocation. The shorter-term variation around that target is called tactical asset allocation.
A group of securities that exhibits similar characteristics. The most common asset class groupings are cash, fixed interest, property, equities and alternatives – such as infrastructure or hedge funds.
A unique code used to identify listed companies.
Australian Real Estate Investment Trusts (A-REITS)
Australian Real Estate investment Trusts (see REITs)
Australian Securities Exchange (ASX)
The ASX acts as a market operator, clearing house and payments system facilitator. It oversees compliance with its operating rules, promotes standards of corporate governance among Australia’s listed companies and helps educate retail investors.
Authorised Participant (AP)
An entity chosen by an ETF's sponsor to undertake the responsibility of obtaining the underlying assets needed to create an ETF. Authorised participants are typically large institutional organisations, such as market makers.
Basis Point (bps)
A measure equal to one percent of one per cent , or 0.01%.
Authorised ETF participants accumulate baskets that include all of the securities tracked by a specific index. The baskets then become creation units for an ETF that tracks that index.
A standard against which the performance of a security, managed fund or investment manager can be measured. Generally, broad market and market-segment stock and bond indexes are used for this purpose. By tracking a benchmark, a fund can provide an investor with a return on a market rather than a specific company or stock.
A quantitative measure of the covariance of a given stock, managed fund, or portfolio relative to the overall market (normally represented by a benchmark). A beta above 1 means the instrument moves more than the overall market, while a beta below 1 means it moves less than the overall market. E.g. If a security has a beta of 1.1 to the overall market, and the market moves 10%, the security would be expected to move 1.1 X 10% = 11%.
The difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it.
A block trade, also known as a block order, is an order or trade submitted for the sale or purchase of a large quantity of securities. A block trade involves a significantly large number of equities or bonds being traded at an arranged price between two parties, sometimes outside of the open markets, to lessen the impact on the security price.
Tradeable, long-term debt raised by a borrower who agrees to make regular interest payments, known as coupons, and to repay the initial sum borrowed at a specified time.
A profit on the sale of assets.
An increase in the dollar value of an asset.
When the proceeds from the sale of an asset (i.e. and ETF) are less than the cost of the investment.
Capital Market Instrument
An instrument which facilitates the transfer of capital in the financial markets, such as equity, bond or a SPDR ETF.
Cap Weighted Index
A capitalisation-weighted index is one in which the components are weighted according to the total market value of their outstanding stock.
The historical tendency of two investments to move together. Investors often combine investments with low correlations to diversify portfolios.
Creation and Redemption Process
The process whereby an ETF issuer takes in and disburses baskets of assets in exchange for the issuance or removal of new ETF shares.
A strategy to manage the risk of fluctuation in asset value through currency movements. Currency hedging is typically implemented using derivatives such as forwards or futures.
The market value weighted average current coupon of the bonds in the portfolio divided by the current market price of the bonds in the portfolio.
The Date Payable is the date on which an ETFs distribution is paid to its unit holders.
Refers to countries or market areas with relatively high levels of economic growth, market liquidity and transparency as well as political stability, rule of law and safety.
Payment to unit holders of a fund out of the profits of the fund. These are allocated on a per unit basis.
In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common goal of diversification is to reduce risk or volatility by investing in a variety of securities or assets.
Distribution by an ETF issuer to unitholders. Usually expressed as a number of cents per share.
Dividend Reinvestment Plan (DRP)
An alternative to cash dividends, allowing unitholders to receive new units instead of cash.
Income or profit of an entity. May be expressed as gross or net.
Earnings Per Share (EPS)
A profitability measure that is calculated by dividing a company’s net income by the number of shares outstanding.
Developing countries where the characteristics of mature economies, such as political stability, market liquidity and accounting transparency, are beginning to manifest. Emerging market investments are generally expected to achieve higher returns than developed markets but are also accompanied by greater risk, decreasing their correlation to investments in developed markets.
Shares (ownership) of a company. Having equity in a business gives you voting rights at a company’s annual general meeting. Equities are a measure of the firm’s value.
ETF Model Portfolio
An ETF Model Portfolio is a carefully selected portfolio of exchange traded funds (ETFs) constructed and managed by a professional investment manager.
The ex-date occurs one business day before the ETFs Record Date. To be entitled to a distribution a unitholder must have purchased the ETF before the ex-dividend date. If you purchase ETFs on or after that date, you are not entitled to the distribution. An ETFs price may move up as the ex-date approaches and then fall after the ex-date.
A marketplace where securities, commodities, derivatives and other financial instruments are traded. Its main function is to ensure fair and orderly trading, as well as efficient dissemination of price information, for any securities trading on that exchange. Exchanges provide a platform to sell securities to the investing public, and may be physical or electronic.
Exchange Traded Fund (ETF)
An investment product that tracks an index, commodity or basket of assets in a similar manner to an index managed fund, but trades like a stock on an exchange.
Exchange Traded Managed Fund (ETMF)
See Active ETF.
The annual operating expenses of an unlisted managed fund or ETF, expressed as a percentage of the fund's assets.
Dividend paid by a company out of profits on which the company has already paid tax. The investor may be entitled to an imputation credit, or reduction in the amount of income tax that must be paid, up to the amount of tax already paid by the company.
Tax rate at which the dividend is franked.
The common name for a Managed Investment Scheme (MIS).
Fund Fiscal Year 1 Forward Price/Earnings
The weighted average of each security's Fiscal Year 1 Forward P/E (FY1 P/E). FY1 P/E is calculated by dividing the closing price as of the report date by the mean Earning Per Share estimate for the next unreported fiscal year as of the report date.
Fund Dividend Yield
Fund Dividend Yield is the dividends received by the Fund from its investments, divided by the market value of the Fund, expressed as a percentage.
Fund Estimated 3 (or 5) Year Earnings Per Share (EPS) Growth
Based on the underlying holdings of the Fund, the change in forward earnings estimates for the underlying holdings between 3 (or 5 or some other period) years are used to calculate a 3 year EPS growth.
Debt security issued by the government.
A hedge is an investment made in one asset to reduce the risk of adverse price movements in some other asset. Normally, a hedge consists of taking an offsetting position in a related security.
All the assets found in a fund. This includes all shares, cash and other financial instruments.
Tax credits passed on to a shareholder who receives a franked dividend.
A representative measure of the value a securities market or a section of that market. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Equity and fixed income market indices are used as the benchmark for index managed funds and ETFs, whose portfolios aim to mirror the components of the index.
Index Dividend Yield
Index Dividend Yield is the weighted average of the indicated annual dividend of the underlying holdings divided by price, expressed as a percentage.
Indexed Portfolio Management
Indexed portfolio management selects a group of securities, generally represented by an index, and holds these securities over long periods of time. The portfolio is generally only traded or rebalanced when the index constituents change. Passive portfolio management usually involves lower turnover than active management.
When a dividend is paid more than once a year, dividends other than the final one are called interim dividends. Typically, dividends are paid twice a year, one interim and one final dividend.
Intraday NAV / iNAV
An Intraday NAV is based on the last trade price of each holding listed in the basket used for creation and redemption including estimated cash amounts. This value is used to provide an intraday relationship between the basket of securities representing the ETF and the market price of the ETF. An intraday NAV is calculated and published throughout the trading day.
A stock with a high level of capitalisation, usually with a market value of more than $10 billion.
An order placed with a broker to buy or sell a set number of shares at a specified price or better. Because the limit order is not a market order, it may not be executed if the price set by the investor cannot be met during the period of time in which the order is left open. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled.
This is a term used to describe an investor's ability to buy or sell a particular security or product. A product which has high trading volumes is easy to buy and sell and considered to be 'liquid'. Also, if Market Makers stand ready to either buy or sell large volumes near fair value at any time, called 'making a market', then this product is also liquid. Liquidity is attractive for investors as it makes their investments more realisable, allowing them to change strategy or generate cash quickly without necessarily incurring high transaction costs.
Rules governing the procedures and behaviour of all entities listed on ASX.
Long or Long Position
A long or a long position is the purchase of a security such as a stock, commodity, currency or ETF in the hope that the asset’s price will rise. A long position is the opposite of a “short” position or short selling.
A measure of the costs incurred when investing in a SPDR ETF. It Includes the Responsible Entity's fee and the Investment Manager's fee, which covers the funds normal operating fees and expenses. It does not include transactional fees such as ordinary brokerage and transactional fees for settling trades, and any interest or other charges on overdrafts.
The market value of a company’s available shares, calculated by multiplying the total number of shares on issue by its current share price.
An entity appointed by the Responsible Entity for the purposes of providing buy and sell quotes in the Units of the Funds in order to help keep the market for the Funds liquid and trading efficiently.
A buy or sell order in securities markets that an investor makes through a broker or brokerage stipulating the best available current price. Market orders are the default option when placing a trade and are likely to be executed because they do not contain restrictions on the buy/sell price or the timeframe in which orders can be executed. They are considered risky when market conditions are volatile because securities market prices can quickly and significantly change.
Market risk (or systematic risk) is the potential for an investor to experience gains and losses from general movements in securities prices. Market risk cannot be diversified away and is systematic of participation in that market.
Minimum Volatility Factor
A category of stocks that are characterized by relatively less movement in share price than many other equities.
The tendency for a security to maintain a certain direction of price trajectory. This tendency is well documented in academic research, which has made “momentum” one of the six smart beta factors that are systematically being isolated in new-generation strategic indexes.
Net Asset Value (NAV) per share
The market value of an ETF's total assets divided by the number of units outstanding.
Current market price of the stock divided by the most recent reported book value per share for the prior fiscal year.
Price/Cash Flow Ratio
The closing price of a security as of the report date divided by the cash flow per share for the prior fiscal year as of the report date.
The closing price of a security as of the report date divided by the Earnings Per Share for the last 12 months as of the report date.
The part of the capital market in which new securities are issued by companies, governments or other groups. Primary markets are facilitated by underwriting groups, which consist of investment banks that set an initial price range for a given security and then oversee its sale directly to investors. In some countries, primary markets are also known as new issue markets (NIM).
Trusts that enable investors to purchase an interest in a diversified portfolio of real estate assets. Investors in property trusts gain exposure to the value of the real estate the trust owns, and receive rental income through distributions the trust pays to investors.
Written authorisation by a shareholder giving someone else (such as fund or company management) authority to represent his/her vote at a shareholder meeting.
One of the six widely recognized, research-based smart beta factors that refers to “quality” equities. Companies whose stocks qualify exhibit consistent profitability, stability of earnings, low financial leverage and other characteristics consistent with long-term reliability such as ethical corporate governance.
In Australia, the Record Date is 5.00pm on the date an ETF closes its share register to determine which unitholders are entitled to receive the current dividend. It is the date where all changes to registration details must be finalised.
REITs or Real Estate Investment Trust
Companies that own and operate commercial properties, such as office buildings and apartment complexes.
Return on Equity
A measure of profitability calculated as the dollars of profit generated for each dollar of shareholders' equity.
A smart beta factor based on the tendency of small-cap stocks to outperform their large-cap peers over long time periods.
The part of the capital market where investors purchase securities or assets from other investors, rather than directly from issuing companies. The national exchanges- such as the Australian Securities Exchange - are secondary markets. In any secondary market trade, cash proceeds from the buying investor to the selling investor rather than to an underlying company/entity.
Short Position or Short Selling
A strategy that seeks to profit from a decline in price of a stock or security. The short seller borrows the security and sells it to another investor, hoping the price falls and that he or she can buy it back at a lower price and lock in a profit. A short position is the opposite of a long position.
Stocks with a relatively small market capitalisations— generally companies with market values of between $300 million and $2 billion. Small-cap stocks are more volatile than mid-or large-cap stocks, but tend to deliver higher returns over longer time periods.
Smart beta is a rules-based approach that seeks to capture specific factors — or investment characteristics — that active managers commonly seek exposure to, while preserving the benefits of traditional passive investments, including transparency, consistency and low cost.
SPDR stands for Standard & Poor's Depositary Receipts, the name of the original exchange traded fund launched by State Street in 1993. It's pronounced "spider".
Strategic Asset Allocation
A long-term allocation of a fund across a variety of asset classes. Portfolios are usually kept close to their strategic asset allocation, though if permitted by the fund, short-term tactical deviations may be taken with an aim to profit from risk or return opportunities.
As defined in the ASX Listing Rules as an interruption to trading at the request of an entity that is not a suspension from quotation.
A unique code used to identify listed companies.
Tracking error is a statistical measure that describes how closely a fund's return is expected to track its benchmark. Tracking error of x% is interpreted as "over a one year period the fund's return is expected to be within x% of the index return two thirds of the time. Ex-post tracking error is the annualised standard deviation of actual excess returns or past performance. Ex-ante tracking error is the expected return deviation based on statistical relationships between securities. A low tracking error means the fund's returns have been very close to its benchmark returns.
Organisation which, on behalf of a company, records changes in unit ownership, issues unit holding statements and makes adjustments for dividend payments, etc.
One of the basic elements of “style”-focused investing that focuses on companies that may be priced below intrinsic value. The most commonly used methodology to assess value is by examining price-to-book (P/B) ratios, which compare a company’s total market value with its assessed book value.
The tendency of a market index or security to jump around in price. Volatility is typically expressed as the annualised standard deviation of returns. In modern portfolio theory, securities with higher volatility are generally seen as riskier due to higher potential losses.
The income produced by an investment, typically calculated as the interest received annually divided by the price of the investment. Yield comes from interest-bearing securities, such as bonds and dividend-paying stocks.
A factor which screens for companies with a higher than average dividend yield relative to the broad market, and which have demonstrated dividend sustainability and persistence.
Yield to Maturity
The market weighted average rate of return anticipated on the bonds held in a portfolio if they were held to their maturity date.
Dow Jones Global Select Real Estate Securities Index
The Dow Jones Global Select Real Estate Securities Index is designed to measure the performance of publicly traded real estate securities, including globally traded real estate investment trusts (REITs) and real estate operating companies (REOCs).
MSCI Australia Select High Dividend Yield Index
The MSCI Australia Select High Dividend Yield Index is designed to reflect the performance of listed Australian companies with higher dividend income and quality characteristics than average dividend yields and the potential for franked dividend income.
MSCI World Factor Mix A-Series Index
The MSCI World Factor Mix A-Series (AUD) Index captures large and mid cap representation across 23 Developed Market countries. It aims to represent the performance of quality, value and low volatility factor strategies. The index is an equal weighted combination of the MSCI Value Weighted, MSCI Minimum Volatility and MSCI Quality Indexes in a single composite index.
S&P 500® Index
The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 9.9 trillion indexed or benchmarked to the index, with indexed assets comprising approximately USD 3.4 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalisation.
S&P Developed ex Australia LargeMidCap AUD Hedged Index
The S&P Developed Ex-Australia LargeMidCap AUD Hedged is a float-adjusted, market capitalisation weighted index comprising large- and mid-cap companies. Foreign currency exposures are hedged to reduce the impact of foreign currency fluctuations between the currency in which each constituent is denominated and the Australian Dollar. This index is part of the S&P Global Broad Market Index (BMI) Series.
S&P Developed ex Australia LargeMidCap AUD Index
The S&P Developed Ex-Australia LargeMidCap (AUD) is a float-adjusted, market capitalisation weighted index comprising large- and mid-cap companies, which represent approximately 85% of each relevant market's total available capital. This index is part of the S&P Global Broad Market Index (BMI) Series.
S&P Emerging Markets LargeMidCap Index
Combining the S&P Emerging LargeCap and S&P Emerging MidCap indices, the S&P Emerging LargeMidCap comprises the stocks representing the top 85% of float-adjusted market cap in each emerging country. It is a subset of the S&P Global BMI, a comprehensive, rules-based index measuring global stock market performance.
S&P Global Dividend Aristocrats Index
The S&P Global Dividend Aristocrats is designed to measure the performance of the highest dividend yielding companies within the S&P Global Broad Market Index (BMI) that have followed a policy of increasing or stable dividends for at least 10 consecutive years.
S&P/ASX 200 A-REIT Index
A sector subindex of the S&P/ASX 200, this index tracks the performance of Australian real estate investment trusts (A-REITs) and mortgage REITs.
S&P/ASX 200 Financials Ex A-REIT Index
A sector sub-index of the S&P/ASX 200, this index contains companies involved in activities such as banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, and financial investment, excluding Australian real estate investments trusts (A-REITs), mortgage REITs, equity REITs, and real estate management & development companies.
S&P/ASX 200 Index
The S&P/ASX 200 is recognized as the institutional investable benchmark in Australia. Index constituents are drawn from eligible companies listed on the Australian Securities Exchange. The S&P/ASX 200 is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalisation. Representative, liquid, and tradable, it is widely consideredAustralia’s preeminent benchmark index.
S&P/ASX 200 Resources Index
A sector sub-index of the S&P/ASX 200 Index, this index provides investors with a sector exposure to the Resources sector of the Australian equity market as classified as members of the GICS® resources sector. Resources are defined as companies classified in the Energy sector (GICS® Tier 1), as well as companies classified in the Metals and Mining Industry (GICS® Tier 3).
S&P/ASX 50 Index
The S&P/ASX 50 Index is Australia’s most prominent large-cap equity index and is designed to represent 50 of the largest and most liquid stocks listed on the ASX by float-adjusted market capitalisation.
S&P/ASX Australian Fixed Interest Index
The S&P/ASX Australian Fixed Interest Index Series is a broad benchmark index family designed to measure the performance of the Australian bond market, which meets certain investability criteria. The index is split across investable investment grade, Australian dollar denominated bonds issued in the local market with maturities greater than one year.
S&P/ASX Government Bond Index
The S&P/ASX Government Bond Index includes all securities in the Commonwealth Government Bond and the State Government Bond Indices. The issuer must be either the Australian Commonwealth Government or Australian State Government, Territories, and Semi-Government issuers.
S&P/ASX Small Ordinaries Index
The S&P/ASX Small Ordinaries index is used as an institutional benchmark for small-cap Australian equity portfolios. The index is designed to measure companies included in the S&P/ASX 300, but not in the S&P/ASX 100.