The Government's announcement today regarding the development of a domestically produced guided missile as part of a multi-billion dollar program is good news for EOS. While a larger defence firm (Raytheon, Lockheed, BAE) will be the primary contractor, I would be surprised if EOS were not engaged as part of the development considering some of their expertise in relevant fields, and a desire from Government to ensure local firms are beneficiaries from the spending. The specific project will add value, but the real benefit will be the longer-term exposure to missile development. Hypersonics is a game-changer, and Australia will (with allies) be spending a ton on this over the coming decade.
06-Mar-2021: The BetaShares Asia Technology Tigers ETF (ASX: ASIA), as Strawman discussed in his weekly email, sent out earlier today, is a simple and inexpensive way to get exposure to fast growing Asian companies like Samsung Electronics, Taiwan Semiconductor, Tencent, Alibaba, Meituan, Pinduoduo, JD.com, NetEase, Infosys and Sea (those companies are their current top 10 positions).
The management fee is 0.57% p.a. and their expenses are running at around 0.10% p.a. - for a total of around 0.67% in fees and costs per annum.
I do not hold ASIA shares (the ETF), having previously preferred Platinum's Asia Investments LIC (PAI), and currently I hold shares in EAI: the Ellerston Asian Investments LIC, whose portfolio manager (PM) is Mary Manning, who has previously worked for George Soros and then for Howard Marks' Oaktree Capital in New York and Singapore. In Singapore, she was the sole person responsible for financial sector investments for Oaktree's Global Emerging Markets Hedge Fund. I prefer that active management that I get with EAI, because I am NOT an expert on Asian companies and I like my Asian company exposure to be managed by somebody who clearly is. However, it is worth noting that active management comes at a price. EAI charge around 0.82% p.a. in management fees (average) plus a 15% performance fee. You do NOT pay performance fees on ETFs. If EAI interests you, you can check out their 31-Dec-2020 holdings (all of them in alphabetical order) here, and their latest (January 2020) newsletter here.
Something worth noting, and it becomes obvious when you look at the performance summary near the top of page 1 of that January newsletter, is that EAI's returns after fees and expenses (but before tax) have underperformed their benchmark index over the past year by -0.46% (around half of one per cent), with that benchmark being the MSCI Asia ex Japan (non-accumulation) (AUD) index, and they've also underperformed that index by -0.48% p.a. since inception. Over three years however, EAI have outperformed the index by 1.85% p.a. That suggests that over the past year, and over the longer term, you may have been better off in an index-hugging ETF, as long as their fees totalled less than 0.46% p.a. However, such an ETF - with fees & expenses that low - does not seem to exist. Asian ETFs all appear to have higher expense ratios than domestic or US focussed ETFs due to the higher cost of investing in Asian markets. For example, the iShares MSCI All Country Asia ex Japan ETF (AAXJ, only available in the US) has an expense ratio of 0.70% p.a.
Our closest Australian equivalent appears to be ASIA, the Betashares Asia Technology Tigers ETF which enables holders to "Gain exposure to the 50 largest Asian technology companies (ex-Japan) in a single ASX trade" - which has total management costs (management fee plus expenses) of 0.67% p.a.
The other thing to note is that while there is no active stock picking involved in ASIA (the ETF), there is a technology filter. All non-tech companies are excluded, and then they buy the 50 largest tech companies across Asia (ex-Japan). Their current geographic exposures are:
And their sector exposure as of 29-Jan-2021 is: