Should I Buy BEAR, BEAR Share price, BEAR ETF

Bear is the longest-standing ASX short ETF, offering investors a chance to bet against the share market. Should I Buy BEAR ETF?

Pros and Cons: BEAR ETF

The Good

  • An Efficient linear-hedging strategy
  • Can be used to hedge a portfolio and avoid consolidating capital gains
  • No Margin calls

The Bad

  • Extremely Risky For inexperienced Investors
  • Relatively High Fees

Who Should Buy BEAR ETF?

BEAR is used by sophisticated investors as an instrument to hedge and profit from Australian share market downturns. Unlike other Bear ETFs this one aims to be equally proportionate to the inverse of the ASX. That is on a given day that the ASX 200 falls 1%, the fund should deliver 0.9%-1.1% returns.

The BetaShares Australian Equities Bear Hedge Fund (ASX: BBEAR) provides a simple way to generate returns that are negatively correlated to the Australian sharemarket.

Uses for BEAR ETF:

  • Hedge a portfolio of Australian equities against a decline in the ASX 200

Given the historic returns of the Australian share market and the nature of geared shorting used in BEAR, the fund is often not suitable over long-term periods.

Ensure to read and understand the PDS and discuss with an investment professional.

Should I Buy BEAR ETF: Facts

Should I Buy BEAR, BEAR Share price, BEAR ETF
Ticker CodeBEAR
Fund NameBetaShares Australian Equities Bear Hedge Fund
BenchmarkNegative Geared Correlation to S&P/ASX 200 Accumulation Index
Number of Holdings3*
Assets Under Management$55 million
Management Costs1.19%
Portfolio Turnover
Inception Date06 July 2012
Income DistributionsAnnual
Distribution Reinvestment PlanNo

*The fund holds 3 holdings currently: Including AUD, and ASX 200 Futures, And a Betashares High-Interest Cash Account

BEAR ETF Price

About BEAR ETF

Betashares BEAR ETF is a unique short ETF that allows investors to gain inverse exposure to the ASX 200 index. The fund is the longest-standing short exposure ETF available on the ASX, being started in 2012.

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Much like the funds BBUS and BBOZ, this ETF isn’t designed for long-term holders but acts as a hedge fund and an instrument to bet against the stock market, usually over a short-term period. We tend to see spikes in volumes to BEAR related to share market volatility and rises in the VIX.

Should I Buy BEAR, BEAR Share price, BEAR ETF

BEAR Share Registry: Link Market Services. Through Link, you can manage your holdings and communications.

BEAR is domiciled in Australia meaning it is a registered fund in Australia for tax purposes. Investors who buy into this ETF, and are Australian residents for tax purposes, will be subject to Australian taxes and regulation.

BEAR ETF Portfolio Goal

BEAR seeks to generate returns that are negatively correlated to the returns of the Australian share market. The Fund expects to generate a positive return when the S&P/ASX Accumulation 200 Index falls (and a negative return when the index rises). Source, Betashares

How Does BEAR ETF Work?

Bear seeks to generate returns that are negatively correlated to the ASX 200 index.

The fund achieves this by selling share index futures contracts in the S&P/ASX 200. The exact instrument used is the SPI 200 Futures. As a result, the fund may not be exactly proportional to the ASX 200 index but will be proportional to futures. These should show a similar trend.

Typically, equity index futures prices and the relevant sharemarket index move in parallel, and so in the hours when the sharemarket is open, price movements in the Bear Funds will reflect movements in the physical sharemarket.

It is important to remember that BEAR operates using Future contracts, not the ASX 200 itself. Futures markets are contantly open. As such, returns may not always be reflective of the ASX 200.

BEAR ETF Benchmark Index

BEAR operates by selling futures contracts in the S&P/ASX 200. Doing so is effectively a form of shorting the ASX 200 index, allowing investors to hedge or bet against the Australian share market. The accumulation index is an extension of the ASX 200 that further accounts for the dividends/distributions paid out by the index, effectively tracking the actual returns for the ASX 200.

The ASX 200 acts as the key benchmark for the Australian share market allowing us to track Australian equity performance.

The S&P/ASX 200 is recognized as the institutional investable benchmark in Australia. The S&P/ASX 200 is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalization. Representative, liquid, and tradable, it is widely considered Australia’s preeminent benchmark index. Source, S&P

BEAR ETF Holdings

  • Cash and Cash Equivalents
  • Exchange-traded derivatives (being ASX SPI 200 futures contracts)

BEAR invests its assets into cash and cash equivalents, namely AUD, as well as selling equity index futures contracts in the ASX 200. Selling ASX 200 futures can generally, be expected to generate a positive return when the ASX 200 index declines on a given day (and a negative return when the ASX 200 index increases).

Selling futures contracts in the way described above is a form of short selling. Since all of the futures tradings is done within the Fund, investors are not exposed to the requirement to pay “margin calls” in the event that the futures positions incur losses.

Should I Buy BEAR ETF: Fees

  • Management Fee: 1.19% p.a
  • Indirect Costs: 0.1%
  • Estimated Transaction Costs: 0.19%
  • Bid/Ask Spread: 0.16%

Estimated Total MER: 1.64%

See Complete ETF Guide for More Fee Information

How Are BEAR ETF Management Fees Paid?

Management fees are automatically deducted from the fund’s Net Asset Value on a daily basis. This means is you as an investor never have to directly send money to BetaShares. It is all processed by the fund as they deduct the fees from the underlying earnings/capital of the fund.

Because of this you never really notice the fees, instead, it just reduces the fund’s performance over time. When the fund sends out its annual statement at tax time you can see the full details of this.

Should I Buy BEAR, BEAR Share price, BEAR ETF
BEAR ETF: Example Annual Statement showing annual fees'

BEAR ETF Bid-Ask Spread

The bid-ask spread is the difference in price between the highest price that a buyer is willing to pay for a security and the lowest price for which a seller is willing to sell it.

  • The narrower the spread the better, as this reduces the trading costs associated with buying and selling ETFs
  • Exchange-based spreads, as on the ASX, are set by the competitive tensions between market markers
  • Larger Funds will tend to have lower bid-ask spreads.
  • Bid-Ask spreads are not set but constantly change throughout the day, depending on supply and demand.

In October the average spread was 0.04%. However, there is no information regarding the long-term average of the fund. Since A200 is a relatively new fund, the average bid-ask spread of the fund is unclear. When purchasing units in the fund you can refer to the live iNAV of the fund to ensure spreads are reasonable.

Investors can assess the fair value of an ETF by comparing the ETF’s market price with the ETF’s net asset value (NAV) per unit. The iNAV provides an indication of the fair value of the ETF in real-time. This can be found on the fund's website during trading hours.

BEAR ETF Fee Comparison

Ticker CodeBEARBBOZSNASVAS
AUM$59M$274M$B$9B
Mgmt Costs1.19%1.19%1%0.10%
Indirect Fees0.29%0.19%-
Average Bid/Ask Spread0.16%0.25%0.35%0%
Total Fees1.64%1.63%1.35%0.12%

We can see that the fund acquires a relatively large bid-ask spread, averaging 0.16% through late 2021. This is likely due to tracking errors associated with the out-of-hours futures tradings. Overall we can see the fund is relatively expensive, SNAS does offer a cheaper alternative, but provides US exposure.

How To Buy BEAR ETF ASX

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Should I Buy BEAR, BEAR Share price, BEAR ETF

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BEAR ETF Performance

Should I Buy BEAR, BEAR Share price, BEAR ETF

We can see the inverse relation evident between the ASX 200 and BBOZ. Notably, we see excellent returns realized over the COVID crash. But as the bull market recommended BEAR lost a significant amount of value.

Competitors: ASX Inverse/Short Funds

Asides from 'ETF Securities', BetaShares is the only ASX provider of inverse ETF funds. In total there are four inverse hedge funds listed on the ASX:

BEAR: BetaShares Australian Equities Bear Hedge Fund (BEAR) is similar to BBOZ as the fund also operates by selling ASX 200 futures on margin. Bear is geared less at a range of -90% to -110%. The management fees are also 1.38%.

BBOZ: BetaShares Australian Equities Strong Bear Hedge Fund is the ASX equivalent to BBUS. This fund operates by selling ASX 200 futures on margin. The management fees are the same price as BBUS.

BBUS: The BetaShares U.S. Equities Strong Bear Hedge Fund – Currency Hedged (ASX: BBUS) provides a simple way to generate magnified returns that are negatively correlated to the U.S. sharemarket.

SNAS: ETFS Ultra Short Nasdaq 100 Hedge Fund is a trading product offering negatively geared exposure to the Nasdaq-100 Index. SNAS provides exposure to the Nasdaq-100 Index within a target range of -200% and -275%. The management fee is 1%.

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Other popular ETFs include: IVVVDHGVAS

Should I Buy BEAR ETF: Prophet's Take

BEAR is not suitable as a long-term investment strategy but is instead employed by sophisticated investors as a specialized investing tool. It should be avoided by novice investors and can result in large losses if not used correctly.

BEAR is used to:

  • Hedge a portfolio of Australian equities against a decline in the ASX 200
  • Access the potential for leveraged returns if the ASX 200 falls

Short exchange-traded products are only intended for investors who understand the risks involved in investing in a product with a short exposure and who intend to invest on a short-term basis. Any investment in short product should be actively managed and very closely monitored, as frequently as daily.

Before making any investment in either Fund, prospective investors should carefully consider whether they are prepared to be exposed to significant losses on their investment.

BEAR Factsheet

Should I Buy BEAR, BEAR Share price, BEAR ETF
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