Exchange Traded Funds (ETFs)

How do Vanguard ETFs work?

Vanguard ETFs are constructed using an indexing approach, so their value moves in line with the index they track. For example, a 2% rise or fall in the index would result in approximately a 2% rise or fall for an ETF which tracked that index (all other things being equal).

Buying an ETF is an easy, fast and low cost way for investors to own a slice of that underlying portfolio, and benefit from changes in its value. You can buy or sell Vanguard ETFs at any time on the ASX throughout the ASX trading day.

ASX Aqua Market

The ASX AQUA market is a service for quoting managed funds, ETFs and structured products on the ASX. It is aimed at domestic and international product issuers that

provide investment products for both retail and institutional investors who have not traditionally been provided with a dedicated operating framework within the exchange-traded environment. Investors purchase ETF securities on the AQUA market in exactly the same way they would any other security for example BHP or ANZ.

Market liquidity for ETFs is maintained by ‘market-makers’ who ensure that buy and sell prices are quoted continuously on the ASX. The structure of ETFs ensures this investment generally trades close to the Net Asset Value (NAV). The NAV is the underlying total value of net assets divided by the number of units on issue.

As ETFs are quoted investments, a ‘share registry’ manages the administration for investors such as confirming settlement, providing distribution and tax information. Vanguard works with Computershare as their nominated share registry.