01 September 2016
GO UCITS ETF SOLUTIONS PLC
The Company announces that a notification has been posted to shareholders of the ROBO Global® Robotics and Automation GO UCITS ETF (the "Fund") informing them of the Company's intention to reduce the Total Expense Ratio applicable to the Fund and of a change to the primary investment strategy of the Fund.
NOTICE TO SHAREHOLDERS IN THE FOLLOWING SUB-FUND OF THE COMPANY:
The Directors of GO UCITS ETF Solutions plc (the "Company") wish to inform Shareholders of the ROBO Global® Robotics and Automation GO UCITS ETF (the "Fund") of its intention to:
· reduce the Total Expense Ratio ("TER") of the Fund from 0.95% to 0.80%; and
· transition the primary investment strategy for the Fund from a primarily swap-backed replication strategy to a primarily physical replication strategy.
The objective of the above changes is to create a more cost-effective investment solution for investors. Further details of each of the above changes are set out below:
Reduction of the TER
As of 16 September 2016, the TER for the Fund shall be reduced from 0.95% per annum to 0.80% per annum.
Transition to a Physical Replication investment strategy
The Fund is designed to provide exposure to the global robotics and automation industry by tracking the performance of the ROBO Global® Robotics and Automation UCITS Index (the "Index").
When the Fund was initially launched in October 2014, it was determined that using "unfunded" total return swaps to replicate the Index (so called "Swap-backed Replication") would be a more cost-effective approach than directly purchasing all of the underlying companies comprised in the Index (so called "Physical Replication"). Primarily, this was because the portfolio transaction costs associated with running a physical portfolio for a newly issued sub-fund were anticipated to be higher (relatively) than the costs associated with entering into total return swaps on the Index .
The Investment Manager's assessment was based on the fact that, where using a Physical Replication strategy to replicate an index, portfolio transaction costs (such as brokerage charges, FX transaction costs and custody transaction charges) are incurred in relation to each periodic rebalancing of the relevant index (i.e. when an index rebalances, any changes to the composition and weightings of the index need to be mirrored by corresponding changes to the composition and weightings of the replicating sub-fund's portfolio of investments). Conversely, Swap-backed Replication does not give rise to the same periodic rebalancing costs. Rather, a counterparty to a swap normally charges an ongoing fixed fee to the relevant sub-fund which is expressed as an ongoing basis point charge to the sub-fund's NAV.
Until a sub-fund reaches a certain size and starts to enjoy greater economies of scale with respect to the portfolio transaction costs incurred when the index tracked by it periodically rebalances, the costs associated with Swap-backed Replication can often be cheaper than the comparable portfolio transaction costs associated with Physical Replication.
Accordingly, as the Fund's NAV have increased since inception in October 2014, the anticipated portfolio transaction costs associated with Physical Replication have decreased relative to the size of the Fund and the case for Physical Replication has become more compelling. The Fund has now reached a size where the Investment Manager believes that the ongoing costs associated with Physical Replication may be cheaper than the ongoing costs associated with Swap-backed Replication.
An additional rationale behind the decision to transition to Physical Replication is the perceived preference amongst some investors for physically-replicating funds. Accordingly, the intended transition provides the Fund with the opportunity to increase in size by attracting additional investment which would lead to even greater economies of scale and a further improvement in the costs associated with Physical Replication.
For the reasons set out above, it is intended that, with effect from 16 September 2016, the Fund will begin the process of transitioning its portfolio (the "Portfolio Transition"). This process is expected to be completed over several business days.
Associated costs and impact on the Fund
All legal and administrative costs associated with the Portfolio Transition will be absorbed by GO ETF Management Limited and will not impact on the Fund's NAV.
The portfolio transaction costs associated with the Portfolio Transition will be charged to the Fund and will be comprised of (i) the transaction costs associated with unwinding the current swap positions and (ii) the transaction costs associated with purchasing the constituents of the Index (the "Portfolio Transition Costs"). The Investment Manager will be working closely with the Company's swap counterparties and brokers to minimise the Portfolio Transition Costs as far as possible.
To minimise the impact of the Portfolio Transition Costs on the Fund's ability to closely track the Index, the Portfolio Transition Costs shall be amortised over a period of time. Accordingly, a fixed daily basis point charge will be determined by the Investment Manager and applied consistently to the NAV of the Fund on a daily basis and until such time as the Portfolio Transition Costs have been fully discharged.
Based on the current NAV of the Fund, it is anticipated that the Portfolio Transition Costs will be largely offset by the TER reduction over the next 12 month period. It is therefore expected that the Portfolio Transition will be a smooth process with minimal impact on the Fund's performance in the short term.
Once the Portfolio Transition Costs have been discharged in full, investors shall see the full benefits of the TER reduction.
Proposed update to Fund Supplement
At the time of launching the Fund, the "investment policy" of the Fund as disclosed in the Fund-specific supplement to the prospectus (the "Fund Supplement") was drafted in such a way as to allow the Investment Manager the flexibility to use both Swap-Backed Replication and Physical Replication. Notwithstanding this flexibility, it is proposed that the Fund supplement be updated in due course to reflect the fact that the Fund will be primarily using Physical Replication, although the flexibility to use Swap-based Replication and other investment types will be retained. The TER reduction will also be reflected.
Further information and copies of the updated Fund Supplement will be made available in due course at:
· the office of the Manager (GO ETF Management Limited) at 33 Sir John Rogerson's Quay, Dublin 2, Ireland;
· the office of the Distributor (ETF Securities (UK) Limited) at 3 Lombard Street, London, EC3V 9AA, United Kingdom; and
· the offices of the relevant paying and information agents relevant to each country in which the Fund has been registered for public distribution.
Should you have any queries, please do not hesitate to contact:
ETF Securities (UK) Limited
Tel: +44 20 7448 4330
Email: [email protected]
The representative in Switzerland: State Street Bank GmbH, München, Zweigniederlassung Zurich, Beethovenstrasse 19, 8027 Zurich, Switzerland. The paying agent in Switzerland: State Street Bank GmbH, München, Zweigniederlassung Zurich, Beethovenstrasse 19, 8027 Zurich, Switzerland.
The articles of association, the prospectus, the KIID, the annual and semi-annual reports can be obtained, free of charge, from the representative in Switzerland.
A copy of the notification will be submitted to the National Storage Mechanism where it is available for inspection at: http://www.morningstar.co.uk/uk/nsm
This information is provided by RNS