For some time now investors have been able to buy Smartshares on the NZX. Smartshares are Exchange Traded Funds (ETFs) that invest in a wide range of securities which track the performance of an index such as the NZX 10 Index. The advantage for smaller investors is being able to easily and cost effectively invest in a wide range of securities with as little as $500. More diversification means less risk and smoother returns. The funds can be bought and sold just like an individual share and offer a similar return to investing directly as the fund management fees are low. The phenomenal growth of investment in Exchange Traded Funds in the last ten years has seen the development of a range of new product offerings.
NZX has this month released eight new Smartshares Exchange Traded Funds. These are managed by BlackRock, a large global investment management company based in New York. The new range includes several ESG funds for the growing number of people who are concerned about socially responsible investment. There are ESG funds covering global, US, European, Japanese and emerging market equities. Alongside these are ‘megatrend’ funds which allow investors to put their money in industry sectors which are transforming the world, such as automation, robotics and healthcare innovation. There is also a new global bond fund which is hedged to the New Zealand dollar.
Exchange Traded Funds are often criticised for being too bland and for blindly following an index. Active investors who rate themselves as good stock pickers may use passive ETFs as the core of a portfolio while preferring direct investments to attempt to outperform the market with their own selections. However, the increased variety and speciality of ETFs provides a middle ground which can satisfy the needs of both passive and active investors.