BetaShares Capital’s newly listed US dollar exchange traded fund (ASX: USD) was one of the top 10 most traded ETFs on the Australian Securities Exchange in its first two weeks of trading with assets under management doubling in the second week of trading.
Listed on 1 February 2011, BetaShares US Dollar ETF tracks the performance of the US dollar (USD) relative to the Australian dollar (AUD) using a simple, transparent and highly cost-effective structure backed by US dollars held in a bank account with JP Morgan Chase Bank.
Drew Corbett, Head of Investment Strategy & Distribution at BetaShares said the average trade size of USD15,000 indicates strong retail appetite for foreign exchange investment opportunities that were previously unavailable to them.
“Exorbitant fees and poor exchange rates in foreign currency bank accounts mean retail investors have been effectively shut out of the foreign exchange markets up until now. Heavy trading by retail investors in the USD ETF suggests a high level of pent up demand for cost effective and simple foreign exchange investment opportunities,” Corbett says.
“In addition, we are finding that there are a significant number of investors who are investing in this product as a simple way to get exposure to the potential recovery of the US economy”, he continues.
The launch of the USD ETF comes at a time of historic strength for the Aussie dollar, which is currently trading at about 40% above its long run average value. The ETF enables investors to capitalise on any potential weakening in the AUD relative to the USD. For example, if the USD appreciates 10% against the AUD (i.e. if the AUD falls in value), the price of the ETF should go up 10% too.
This exposure comes at a fraction of the cost of current mechanisms available to most investors. Investing AUD10,000 in a US dollar bank account can cost an individual up to USD700 over a six month period due to fees, costs and poor exchange rates. The superior rates provided by BetaShares mean the same investment in its ETF would cost around AUD70.
BetaShares has also reported strong interest from small to medium business owners which have large US dollar capital expenditures planned in the future and are looking to hedge against a fall in the Australian dollar.
The US Dollar ETF is the third ETF listed by BetaShares after the Resources Sector ETF (ASX: QRE) and Financial Sector ETF (ASX: QFN) listed on the ASX in mid December. The product launch is further evidence of BetaShares’ commitment to provide Australian investors with ETFs tailored to the Australian market.