Here are answers to frequently asked questions about our Australian-domiciled ETFs. If you have questions that aren't answered in this list, please contact our SPDR ETF team on the number below.
What are SPDR ETFs?
An ETF is a collection of securities that typically track the performance of a broad or specific segment of the market e.g. Australian and international shares, small and large-cap shares, Australian bonds or commodities. SPDR ETFs are a family of ETFs offered by State Street Global Advisors that trade on the Australian Securities Exchange (ASX). They are priced continually and can be bought and sold throughout the trading day. SPDR ETFs are bought by thousands of Australian investors, whether it's through SMSF or directly, and provide liquid, cost-efficient exposure to a broad range of assets.
What is the difference between an ETF and a managed fund?
There are several differences between managed funds and ETFs. To cite a few:
Like managed funds, ETFs allow investors to track hundreds of Australian and international indices, including the S&P 500® and the S&P®/ASX 200 indices, as well as specific sectors or industries (e.g. financials, resources or listed property)
Unlike managed funds:
- ETFs give investors the flexibility to buy and sell on the Australian exchanges throughout the day, at the market price. Managed funds may only be purchased or sold at the fund's net asset value (NAV), which is calculated at the end of the trading day.
- Securities held within most ETFs are posted daily allowing investors to make informed portfolio decisions in real time. However, managed funds generally release their holdings periodically, for example quarterly.
- When ETF investors sell their holdings, portfolio managers do not need to sell securities to raise cash for the redemptions. So, unlike traditional unlisted funds, one ETF investor's sell decision has no impact on other investors and capital gains distributions are kept low.
Talk to your investment adviser to determine which one is right for you.
Why do investors buy SPDR ETFs?
The most common reason is to gain low cost access to a new asset class in a single trade or to further diversify an existing asset allocation to minimise stock specific risk. Another popular approach is to use ETFs to achieve a core-satellite strategy. This means an investor holds a relatively stable and diversified investment as a "core" holding, adding "satellite" positions around this core in the hope of generating additional returns.
How are SPDR ETFs priced?
ETFs are designed to trade at a price that approximates the market value of their underlying assets. To facilitate this, most ETFs publish detailed information about their portfolio holdings on a daily basis. Doing so enables investors to identify when an ETF is over-valued or under-valued relative to its underlying assets and to transact accordingly. Additionally, certain large market participates, known as "authorised participants", create and redeem directly with the ETF in large blocks helping to keep the trading price of the ETF in line with the market value of their underlying assets.
Are SPDR ETFs physically backed?
All SPDR ETFs are physically backed, that is, they hold the assets underlying the associated index.
What are the underlying investments?
Underlying investment refer to the securities that make up the benchmark index. SPDR ETFs will invest only in those securities. Details of the index composition and holdings can be found on this website or in the ETF's Product Disclosure Statement.
What are the cost advantages in investing in SPDR ETFs?
SPDR ETFs are designed to be cost-efficient. As an indexed investment, they can have the advantage of being less expensive to operate and therefore typically have lower management costs. Management costs have become increasingly important to investors because they can have a significant impact on your portfolio's return and potential for wealth accumulation.
What are cross-listed ETFs?
ETFs which are domiciled outside of Australia and listed on an overseas exchange (e.g. in the U.S) cannot be traded and settled on the ASX. Some of these offshore ETFs are made available for trading on the ASX in the form of CHESS Depository Interests (CDIs) which mirror the interests in the offshore ETF. Such ETFs are sometimes described in the marketplace as being 'cross-listed' but it is important to note that you do not hold interests in the offshore ETF directly as it is listed on its overseas primary market, instead you hold CDIs. The CDIs trade like any other securities quoted on the ASX. An example of such an ETF is the U.S. domiciled SPDR® S&P 500® ETF Trust which is principally listed and traded on NYSE Arca, Inc. under the symbol "SPY". CDIs have been created over units in SPY and are quoted on the AQUA market of the ASX and interests in the U.S. SPY fund are also traded on other global exchanges such as Japan and Singapore.
How do I buy or sell SPDR ETFs?
SPDR ETFs can be bought and sold on the ASX through a stockbroker like other listed securities.
ETFs trade during normal ASX market hours. It is recommended that investors refrain from trading before 10.15am or 10.30am. This gives the institutional liquidity providers additional time to ensure ETF prices more accurately reflect the true value of the ETF. Many investors also avoid trading at the market close, as the closing auction can result in additional price volatility.
Is there a minimum investment?
With ETFs, there is no minimum investment requirement.1 An investor can purchase as few as one ETF unit or as many as preferred.
What fees and expenses are associated with SPDR ETFs?
There are a number of costs associated with investing in an ETF, including management costs charged by the ETF provider and brokerage commissions. Investors may also consider indirect costs, including those stemming from the bid/ask spread and any premium/discount volatility.
Details of the management costs for SPDR ETFs can be found on this website or in the ETF's Product Disclosure Statement.
Can SPDR ETFs be bought on margin and sold short?
As capital market instruments, a share in a SPDR ETF can be traded as would a traditional equity. Your broker relationship must permit buying on the margin and short selling of stocks. The use of margin or short selling entails a high degree of risk, may increase potential losses and is not suitable for all investors. Please assess your financial circumstances and risk tolerance prior to engaging in these transactions.
What counterparty risk are ETFs exposed to?
Since SPDR ETFs invest directly in securities, investors are not exposed to counterparty risk associated with swaps or derivatives.
What is liquidity and why does it matter?
Liquidity refers to how easily an ETF can be bought or sold. ETF liquidity should be considered with respect to both the ETF and the underlying securities the ETF holds. Highly liquid ETFs and ETFs that have highly liquid underlying securities (even if the ETF does not have high trading volumes) typically have narrower bid/ask spreads than ETFs that trade less or hold less liquid securities.
Are returns guaranteed?
No. As with all investments, there are certain risks of investing in SPDR ETFs and the value of your investment will go up or down with the value of the assets of the Fund.
Why do returns sometimes differ from the benchmark?
Though SPDR ETFs seek to track their benchmark indices as closely as possible, there will generally be some deviation from the performance of the index (also called tracking error). This deviation is typically due to operating expenses, transaction costs, cash flows and operational inefficiencies, which are not reflected in index returns. In addition, funds that receive tax treatment different from their target index (e.g., funds benchmarked to MSCI indices) may also have performance that deviates from the index.
What are the distribution arrangements?
In general terms, investors will be entitled to a pro rata share of the distributable income (if any) for that period, based on the number of units held in the fund. Distributable income includes dividends and distributions received from the fund's investments. More information on distributions, including the timing of payment, can be found on this website and in the Product Disclosure Statement for the relevant ETF.
Can distributions from SPDR ETFs be reinvested?
With the exception of the SPDR S&P 500 ETF (SPY), all SPDR ETFs have a distribution reinvestment plan. Reinvestment plan documentation can be downloaded from the fund detail pages on this website.
How are franking credits handled?
OZF, OZR and SSO will distribute all franking credits they receive on a semi-annual basis. STW, SFY, SLF and SYI will distribute all franking credits they receive on a quarterly basis.
How do I update my contact details (i.e. change of address)?
Contact details can be updated via the Investor link on the Link Market Services, the share registry website for SPDR ETFs.
Where can I get the latest information on the SPDR ETF I invested in?
Our website www.spdrs.com.au has up to date information on all SPDR ETFs. You may also contact us at spdretfsAUS@ssga.com or +61 2 9240 7600 to speak to our SPDR ETFs Sales and Support team.
1 Subject to brokerage rules/cost/fees