Black Border Layout

A B C S O F E T F S

LIMITED DISTRIBUTION MKTGH0521A/S-1630902-1/20

2

W h a t e x a c tly is a n E x c h a n g e T ra d e d F u n d (E T F )?

For illustrative purposes only. Where a company or a key figure is mentioned, it is only provided as a reference and does not represent endorsement by these companies. Reference to specific company names is for illustration only and should not be construed as investment advice or

recommendation. Blackrock has not acquired any rights or license to reproduce the trademarks, logos or images set out in this document. The trademarks, logos and images set out in this document are used only for the purposes of this presentation.


Dive rs ific a tion

Liqu id ity

T ra n s pa re n c y

C os t E ffe c tive

3

A c c e s s ibility

E T F s C a n Ma ke In ve s tin g E a s ie r

LIMITED DISTRIBUTION

Source: BlackRock April 2020. For illustrative purposes only.

MKTGH0521A/S-1630902-3/20

4

Individual

Securities

Single securities (either equity or fixed

income) usually available on the

NYSE or LSE

A diversified portfolio of securities (shares,

bonds, commodities) that usually tracks

an index tradeable on an exchange (like

the ASX)

ETFs Managed

Funds

A diversified portfolio

of securities that is professionally

managed

Dive rs ific a tion h a s be e n Ke y

LIMITED DISTRIBUTION


MKTGH0521A/S-1630902-4/20

3 tre n d s to fu e l E T F g rowth

5


Investors are

cost sensitive AND

demand quality

Access to bonds

for ALL investors

ETF investors are

active investors


How many ETFs are there?

6

AUD102Bof Australian AUM

252 ETPslisted in Australia

USD8.6Tof Global AUM

+8000 ETPslisted globally

Source: Global – BlackRock April 2021 ; Australia - ASX, as of April 2021


7

$5TR

ILL

ION

2018

$6TR

ILL

ION

2019

$7TR

ILL

ION

2020

$8.5TR

ILL

ION

2021

$10TR

ILL

ION

2022

$12TR

ILL

ION

2023

Globa l E T F a s s e ts cou ld re a c h US $12 trillion ove r 5 y e a rs

C u rre n tly s ta n d in g a t US D$8.7B

Source: BlackRock; Global Business Intelligence, as of April 2018. Numbers are

USD.

You are here


-

20

40

60

80

100

120

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Bill

ion

s

Year

Equity Fixed Income Commodity Property Mixed Asset Infrastructure Currency Cash

AUSTRALIAN ETP INDUSTRY - SPLIT INTO ASSET CLASSES

Equities $78b

Fixed Income $10b

Commodity $3b

Property $3b

E T P In d u s try a s s e ts u n d e r man a g e me n t, a s a t Marc h 2021

FOR WHOLESALE CLIENTS ONLY – NOT FOR DISTRIBUTION TO RETAIL CLIENTS

$102B

8

Source: ASX, BlackRock, as at March 2021


ETF DUE DILLIGENCE

HOW TO CHOOSE

THE RIGHT ETF

9LIMITED DISTRIBUTION MKTGH0521A/S-1630902-9/20

Just like buying a car, you need to look under an ETF’s bonnet

10

Images are used for illustrative purposes only and are the property of their respective owners.


The ETF Due Diligence Check List

11

How well do you know your ETF provider?1. Manager

What is inside your fund?2. Exposure

What are the implications of structure?3. Structure

Can you trade when you need to?4. Liquidity

What is the true total cost of ownership?5. Costs

Images are used for illustrative purposes only.


1. Manager Evaluate the ETF manager’s ability to deliver the index performance

12

Tracking Difference is key for the long term investor

Tracking difference is simply the total return difference between the ETF and its underlying index over a given time period

Bonds Market L iqu id i ty

Index Fund

Index

Fund

Tracking difference can be viewed on the ETF issuers site for each ETF

1 year performance

Source: BlackRock 30/4/2021; For illustrative purposes only that has not been prepared having regard to your objectives, financial situations or needs.


2. Exposure What’s inside your ETF?

13

Bonds Market L iqu id i ty

Targeted exposure

Broad or narrow?

Depth of coverage?

Exposure performance

Is it the exposure you intended?

Does it express your views?

Frequency of disclosure and level

of transparency

Infrequent disclosure of holdings may expose

investors to risk.

For illustrative purposes only that has not been prepared having regard to your objectives, financial situations or needs

Index definition methodology impacts upon

economic exposure and outcomes – check portfolio

composition and listed underlying securities on issuers

website

Index Exposure

What exposure does the index provide?

Consider the weightings in countries, sectors, and

companies and its relevance in your investment objectives.

Index Methodology


Understand the methods that the index provider uses to screen companies

to include in the index.


2. Exposure The ETF’s underlying index should deliver your desired exposure

14

When it comes to ETF benchmarks, it may seem one index is as good as another.

Understanding the difference between indices is key to selecting the most appropriate ETF to achieve your investment

objectives.

Bonds Market Liquidity

Example

Index Exposure


Index Methodology

How is the index constructed?

S&P 500 S&P MidCap 400 S&P SmallCap 600

Australian Equities

For illustrative purposes only. This is not a securities recommendation to invest in any particular financial product.


2. Exposure Case Study – USA Equities

15

12m Performance S&P Indices, as of April 2021

For illustrative purposes only that has not been prepared having regard to your objectives, financial situations or needs

Source: BlackRock as at 30 April 2021. Index returns are for illustrative purposes only and do not represent any actual fund performance. Indexes are unmanaged and on cannot invest directly in an index. Index performance does not reflect any

management fees, transaction costs or expenses. Past performance is not a reliable indicator of future performance. This is not a securities recommendation to invest in any particular financial product.

20

40

60

80

100

120

140

160

180

200

Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21

S&P 500 S&P MidCap 400 S&P SmallCap 600


3. Structure ETF Comparison

16

Source: BlackRock. For illustrative purposes only.

Physical Synthetic Active Index

Holds underlying Securities Yes No Yes Yes

Attributes

Simple

Transparent

Cost Efficient

Access restricted

markets

Access exposures where

physical not practical

Execute complex

strategies

Has fund Manager

oversight

Typically higher cost

Possibly single market

maker

Trades at NAV

Broad market exposure

Transparent

Cost Efficient

Wide Range

Counterparty Risk No Yes No No

Credit Risk No Yes No No

Daily Transparency into

HoldingsYes Depends No Yes


17

ETFs benefit from multiple layers of liquidity resulting in potentially lower entry / exit costs.

4. Liquidity Liquidity is there but at what cost?

On-Screen Liquidity

A reflection of the average trading

volume as well as the bid/ask spread on

exchanges

Underlying Liquidity

Derived from the ETF’s underlying

holdings/securities

Secondary Market

Primary Market

Secondary Market

Primary Market



5. Costs So let’s just take a step back…

18

Assessing the cost of an ETF requires investors to look beyond Management Expense Ratio (MER) and take an approach

called Total Cost of Ownership (TCO).

COST OF PURCHASING

• Bid/ask spread

• Broker Commissions

COST OF HOLDING

Management fees

Opportunity cost

COST OF SELLING

Bid/ask spread

Broker Commissions

Tax

+

+

COST OF PURCHASING

• Stamp duty

• Luxury car (for those so lucky!)

COST OF HOLDING

Maintenance & Service

Petrol

Registration & Insurance

COST OF SELLING

Platform (car sales) Fees

+

+



The ETF Due Diligence Check List

19

How well do you know your ETF provider?1. Manager

What is inside your fund?2. Exposure

What are the implications of structure?3. Structure

Can you trade when you need to?4. Liquidity

What is the true total cost of ownership?5. Costs

Images are used for illustrative purposes only.


Important Information

20

Issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFSL 230 523 (BIMAL)

This material provides general information only and does not take into account your individual objectives, financial situation, needs or circumstances. Before making any

investment decision, you should assess whether the material is appropriate for you and obtain financial advice tailored to you having regard to your individual objectives,

financial situation, needs and circumstances. This material is not a financial product recommendation or an offer or solicitation with respect to the purchase or sale of any

financial product in any jurisdiction.

This material is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law

or regulation. BIMAL is a part of the global BlackRock Group which comprises of financial product issuers and investment managers around the world. BIMAL is the

issuer of financial products and acts as an investment manager in Australia.

BIMAL is the responsible entity and issuer of units in the Australian domiciled managed investment schemes referred to in this material, including the Australian domiciled

iShares ETFs. Any potential investor should consider the latest product disclosure statement (PDS) before deciding whether to acquire, or continue to hold, an

investment in any BlackRock fund. The PDS can be obtained by contacting the BIMAL Client Services Centre on 1300 366 100. In some instances the PDS is also

available on the BIMAL website at www.blackrock.com.au. An iShares ETF is not sponsored, endorsed, issued, sold or promoted by the provider of the index which a

particular iShares ETF seeks to track. No index provider makes any representation regarding the advisability of investing in the iShares ETFs. Further information on the

index providers can be found in the BIMAL website terms and conditions at www.blackrock.com.au.

BIMAL, its officers, employees and agents believe that the information in this material and the sources on which it is based (which may be sourced from third parties) are

correct as at the date of publication. While every care has been taken in the preparation of this material, no warranty of accuracy or reliability is given and no

responsibility for the information is accepted by BIMAL, its officers, employees or agents. Except where contrary to law, BIMAL excludes all liability for this information.

Any investment is subject to investment risk, including delays on the payment of withdrawal proceeds and the loss of income or the principal invested. While any

forecasts, estimates and opinions in this material are made on a reasonable basis, actual future results and operations may differ materially from the forecasts, estimates

and opinions set out in this material. No guarantee as to the repayment of capital or the performance of any product or rate of return referred to in this material is made

by BIMAL or any entity in the BlackRock group of companies.

No part of this material may be reproduced or distributed in any manner without the prior written permission of BIMAL.

© 2021 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, iSHARES and the stylised i logo are registered and unregistered trademarks of

BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.


http://www.blackrock.com.au/

http://www.blackrock.com.au/

Documents

Black Border Layout