A suite of US index funds launched into the Australian retail managed fund market today and may widen the gateway to overseas diversification and could raise the popularity of direct investing according to TD Waterhouse.
Launched by the global online financial services group and managed by TD Waterhouse Investor Services Australia, the five US based index funds will give Australian investors access to international funds and portfolio diversification.
TD Waterhouse Investor Services managing director Ian Struthers says a global research paper by the group indicates a trend within Australia for overseas diversification, but few opportunities exist.
“There is a lack of managed funds specialising in international equities. Only 10 per cent of Australian funds specialise compared to 30 per cent in Canada,” he says.
Of the five US index funds, four are a first for the Australian retail market. These are the TD Waterhouse Trust Dow 30 Index Fund which tracks the Dow Jones Industrial Average, the TD Waterhouse 500 Index Fund which tracks the S&P 5000 Index, the TD Waterhouse Extended Market Fund which tracks the Wilshire 4500 Index and the TD Waterhouse European Index Fund which tracks the MSCI Europe Index
The final index fund is the TD Waterhouse Bond Index Fund. An additional two actively managed funds, the TD Waterhouse Technology Fund and the TD Waterhouse Tax Managed Growth Fund, have also been introduced.
The index funds also offer a competitive management expense ratio (MER). TD Waterhouse Investor Services research shows the average index fund expense ratio ranges from 0.5 per cent to 1.4 per cent, compared to an average Australian retail managed fund expense ratio of 1.95 per cent.
Struthers says while only five per cent of Australians investors invest directly in managed funds compared to 45 per cent of Americans, global investment trends and increasing ease of access should show an increase in the next few years.
“We expect 20 per cent of Australian investors to invest directly by 2004,” he says.
