VanEck launches ‘first of its kind’ geared Aussie equity fund

ETF specialist fund provider, VanEck, has today launched what it has dubbed the “most cost-effective leveraged equity managed fund solution in Australia”.

Known as the VanEck Geared Australian Equal Weight Fund, and listed on the Australian Securities Exchange (ASX) as GMVW, the fund combines investors’ capital and borrowed funds to invest in VanEck’s flagship leveraged Australian Equal Weight ETF – listed on the ASX as ‘MVW’.

VanEck has spruiked the GMVW as the “first of its kind in Australia”, providing local investors with a far more diversified option than can be offered through the highly concentrated S&P 500 index – a market dominated by the Magnificent Seven – and the ASX 200.

“Australian equities concentration is far more pronounced than in the US, with little change in the composition of the S&P/ASX 200 top 10 companies over the last two decades,” VanEck noted.

Dominated by the big four banks, CSL and BHP, the ASX 200 is today one of the “most concentrated markets in the world”, VanEck said.

According to Arian Neiron, chief executive and managing director of VanEck Asia Pacific, the GMVW is a response to significant adviser and investor demand for more diversified investment options, and “represents a game-changing opportunity for ASX investors in a ‘higher for longer’ interest rate environment”.

“Furthermore, with many market participants questioning valuations of some of Australia’s largest companies, an equal weighting approach to Australian equities is a prudent alternative,” he said.

Citing its own research, VanEck said that equal weighting strategies will, over the long term, typically outperform market cap strategies.

Neiron boasts that the GMVW “will give investors the opportunity to significantly enhance their returns”.

“The return potential, in both directions, is amplified by gearing with no personal recourse for investors,” he added.

While the GMVW charges no management fees, the fund attracts an “indirect cost” to investors of 0.35% p.a. of net asset value. This increases to 0.70% if the fund’s gearing level is at or above 50%.