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Question asked 12/04/2024

Lend

Hi guys I asked you about van eck etf lend when it first came out and you guys said it was new to the market and would have a look at it I like the private equity theme and it so far has been returning 10% pa in monthly dividends ( not sure if this will continue long term) But my concern is that it charges 0.65% management fee but also in its pds it says it also has an estimate of indirect costs of 4.92% pa And gives an example of if you had $50000 invested then you would be charged $2785 pa I dont understand how this works would your share value be deducted by this amount each year or is this amount taken out of the pool for dividends before it is distributed If seems quite a big fee which would make me re consider my investment Thanks Tony

Answer

Hi Tony,

Thanks for the prompt now that LEND has been listed for ~3 months. With any investment fee charged on an ETF or managed fund for that matter, it comes directly from the unit price. i.e. If the unit value is $10 and the fund charges a fee of 0.20%, the unit price would become $9.80.

Indirect costs are very high, however, in all likelihood, they would be performance related. For example, the Blackstone Secured Lending Fund which is the largest holding in the ETF (8%) has a 17.5% performance fee there so the indirect fee estimation would likely incorporate that plus the cost of currency hedging.

With only $20m in the ETF, it is still only early days and without having an intimate knowledge of the underlying funds it holds, it’s hard to provide a definitive view, although the fee’s do seem high. One alternative we are currently looking at is the Perpetual Credit Income Trust (PCI).

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