First Australian ETF is launched

Australia’s first exchange traded fund (ETF) has been launched.

After much hype in the market surrounding ETFs, Salomon Smith Barney (SSB) has launched what it calls the IndexShares 100 product which tracks the S&P/ASX 100 Index.

Much of the hype has concentrated on the success of ETFs in the US where almost $A100 billion is invested in the products. State Street Global Advisors (SsgA) and Barclays Global Investors are also due to launch an ETF product on the Australian market in April.

The IndexShares are traded on the ASX like regular shares, and can be traded through any broker and at any time during the trading day. Another appeal of the product is no minimum investment, and holders have immediate access to dividends, distributions and franking credits which are accumulated daily and distributed quarterly.

Salomon Smith Barney believes the cost structure of the IndexShares 100 will also add to its popularity on the Australian market. The group's Corporate & Retail Equity Derivatives director Steuart Roe says the 95 cent per $100 pa management fee is all-inclusive and about half the amount charged by most of the managed funds.

"Our pricing is all-inclusive and totally transparent so that investors know the exact cost of each transaction," Roe says.

SSB's Pia Cooke says that while the product is the first on the market, the group is expecting competition to arise in the second quarter of the year.

Trading of the IndexShares 100 product is expected to begin on 2 March.