The fund manager said the funds allow Australian investors and their advisers to benefit from the “established long-term investment benefits of gearing, in a more moderate way than previously available via existing exchange-traded funds”.

The initial two funds in the range comprise:

• Betashares Wealth Builder Australia 200 Geared (30-40% LVR) Complex ETF (G200), which will provide moderately geared exposure to the returns of the broad Australian share market.
• Betashares Wealth Builder Diversified All Growth Geared (30-40% LVR) Complex ETF (GHHF), which will provide moderately geared exposure to the returns of an ‘all-cap, all-world’ share portfolio.

The Wealth Builder funds are internally geared, which means each fund enters into the borrowing arrangement itself, which ensures that investor risk is limited to the capital invested, with no possibility of margin calls for investors.

Due to the structure of the funds, investors benefit from institutional interest rates that Betashares is able to access, which are typically significantly lower than those available to individual investors seeking to borrow in their own capacity.

Betashares told SMSF Adviser that financial advisers can take advantage of gearing for their SMSF client portfolios through the wealth builder range.

“As a start, the new funds can help SMSFs make their concessional contributions work harder in the market by providing about $45,000 of exposure for $30,000 of invested capital,” Betashares said.

“The wealth builder funds also allow investors to maximise the use of their SMSF to generate franked income, giving advisers more options to help their clients generate income within their SMSF.

“Finally, for pension phase SMSFs with a lifetime annuity, the Wealth Builder range can give these clients more flexibility to boost their pension payments while also retaining their investment exposure to the equity market.”

The funds have a fee structure of 0.35 per cent per annum of the fund’s gross asset value.

“Utilising gearing is a well-established approach to building long-term wealth, but it has traditionally been expensive to access or used in funds that are only suitable for investors with a tolerance for higher gearing levels,” said Betashares chief executive Alex Vynokur.

“The Wealth Builder series has been designed for investors who are comfortable with leverage but are seeking a more moderate level of gearing better suited to a ‘buy and hold’ investment strategy as part of their wealth accumulation goals.

“We are proud to continue to responsibly innovate and build out the range of portfolio tools available to investors and their financial advisers.”