Van Eck to launch global infrastructure and franked dividend ETFs on ASX

Apr 19th, 2016 | By | Category: Fixed Income

Van Eck, the asset manager behind the Market Vectors range of exchange-traded funds, is planning to launch two new ETFs on the Australia Stock Exchange that will provide local investors with exposure to global infrastructure securities and high dividend stocks that are not subject to double taxation under Australian law.

Arian Neiron, Managing Director, VanEck Australia

Arian Neiron, Managing Director, VanEck Australia.

The VanEck Vectors FTSE Global Infrastructure (Hedged) ETF (IFRA) will be the first Australian ETF to give investors access to global infrastructure securities. The ETF will track the FTSE Developed Core Infrastructure 50/50 Index (Hedged AUD), the infrastructure benchmark commonly used by industry professionals such as asset consultants and fund managers.

The index comprises securities in developed countries which provide exposure to core infrastructure businesses, namely transportation, energy and telecommunications, as defined by FTSE’s International Classification Benchmark. The index sector allocations will be roughly utilities (50%), transport (30%), and other (20%). Individual company exposure will be capped at 5%. The fund will have management fees of 0.52%.

The VanEck Vectors S&P/ASX Franked Dividend ETF (FDIV) will also be an Australian first as it will be the only ETF to include companies within the S&P/ASX 200 that have paid out 100% franked dividends in the past two years. A franked dividend is an arrangement in Australia that eliminates the double taxation of dividends. The shareholder is able to reduce the tax paid on the dividend by an amount equal to tax already paid under a foreign jurisdiction. In the case of a higher tax rate under the foreign jurisdiction, the investor is able to claim the difference as a tax credit against other income. The ETF will track the S&P/ASX Franked Dividend Index, which will also screen companies based on the sustainability of their dividend policies.

The index comprises 30 companies within the S&P/ASX 200 that have paid out 100% franked dividends in the past two years. The weight of each industry sector is capped at 40% and the weight of any individual company is capped at 10%. The fund will have a management fee of 0.35%.

Arian Neiron, Managing Director at VanEck Australia, said in a statement: “We are delighted to shortly be launching these two first of their kind ETFs. The new ETFs have been created in response to increasing demand from Australian advisers and investors for greater choice, flexibility, transparency and cost-effectiveness when investing.

“IFRA meets the increasing demand for global infrastructure as investors continue to be attracted to its stable income and low correlation to traditional asset classes. We are excited to be the first to give Australian investors the opportunity to access a portfolio of global infrastructure securities via a single trade on ASX.

“FDIV will be the only passive investment strategy that only includes Australian companies that have paid dividends with 100% franking credits.  Australian investors have a love affair with franking credits particularly those who have a zero tax rate.  There is nothing more gratifying than receiving a cheque from the Australian Tax Office,” he said.

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