Why is DZZF not more popular?

Hi Crisis, good question.

As I’m licensed to offer advice in Australia, I’ll just mention a disclaimer: I’m only able to offer general financial information, so I can’t take into account anyone’s needs, goals or objectives. More information is available in our Financial Services Guide (FSG).

Okay, in my opinion there’s really nothing majorly wrong with DZZF. Some people worry that Betashares is ‘double dipping’ on fees — but they’re not. Fees are just pro-rata rebated on the underlying funds. So you’re right, the lower management fee is a big appeal. And it’s a reason I had DZZF in our model portfolios for many years (while we don’t cover it any more, it’s still my preferred ethical position).

There are other ethical ETFs but nothing that’s really as compelling as DZZF for an ‘all in one’. For a few years, passive ethical ETFs got a lot of positive momentum from newer investors who wanted to invest in sustainable ways. However, my personal view is now more investors are realising that ethical investing is a very broad spectrum, and passive investing can only take us so far. For example, impact investing is something that isn’t easily done passively.

So what I mean to say is, DZZF is a good ETF for ethically-inclined investors. But ethical investing is quite niche (see Dave’s reply).

More broadly, there are risks to ethical investing:
* ethical ETFs often weight more heavily to tech and healthcare (which can increase volatility)
* they underweight to energy and other sectors that can perform well (e.g. coal, iron ore, etc. have done really well the past 24 months)
* they can be more expensive, which can cost us more — and there’s no reason for the extra fees.
* many are still small, from a funds under management (FUM) perspective — but they’re slowly catching on.

I’m not sure if that helps.

Owen Rask

Hi Null Null.

It’s a fair question. There doesn’t look to be anything obvious to me that would be off-putting for someone who wants to invest in ethical funds like you described. It could be the bonds I suppose.

To be fair, the fund has only been around for a couple of years, so it could well gain more traction over time.

For a standard comparison, the fund DHHF was also listed at the end of 2020 I believe, and it has about 200m in the fund vs DZZF at 50m. So when you factor in ‘ethical’ investing being less popular overall and bonds also taking away appeal for some people, it doesn’t look unreasonable that DZZF would be a lot smaller.

I think it’s worth remembering that if they close the fund down you’ll simply get your money back as the underlying fund units are sold off. Not really ideal, but not the end of the world either. Could be an issue if you build up a lot of gains in the fund, but then that would mean the fund is a lot bigger due to performance alone which means Betashares is raking in much more fees and therefore less likely to close it down.

Just a few thoughts… hope that helps. Maybe someone has a better idea why it’s not more popular.

Cheers, Dave.