The Semiconductor space has continuously delivered market-beating returns in the past. With SEMI allowing Australians easy access to the booming industry, Should I Buy SEMI ETF?
SEMI ETF Pros and Cons
- An easy way to gain exposure to the growing Semiconductor sector
- Only Semiconductor ETF domiciled in Australia
- Excellent Historic Returns of the Semiconductor sector
- 30 Companies offers low diversification
- Some Companies are missing
- Other Semiconductor ETFs are available at a lower MER
Who Should Buy SEMI ETF?
ETF Securities Semiconductor ETF is made a thematic ETF that largely targets investors looking to invest within the growing Semiconductor sector, but are unsure of which individual companies to select.
Should I Buy SEMI ETF: Facts
|Benchmark||Solactive Global Semiconductor 30 Index|
|Number of Holdings||30|
|Assets Under Management||$50M|
|Inception Date||27th August 2021|
|Distribution Reinvestment Plan||Yes|
|Total 5-Year Returns||31.80% p.a (Index Return)|
SEMI ETF Price
Following the launch of the SEMI ETF back in August we can see a slight decline in the price. The fund was launched at a price of $10. The fund peak over the past few months was $10.23 in September before its low of $9.26 in early October.
SEMI ASX AUM Growth
SEMI has been a success for ETF securities as its AUM has quickly grown as the fund has grown its investor base. Despite the fund’s price being down since launch, we can see the AUM has grown to $47.5 Million, this represents a 2270% increase from its launch size of $2 Million.
About SEMI ETF
ETF Securities Semiconductor ETF (SEMI), is currently the only ASX-listed ETF that targets the Semiconductor theme. Semiconductor ETFs has been largely popular within the ASX market with large and growing AUM across multiple fund providers including VanEck's SMH, iShare's SOXX, and Proshare's USD leveraged Semiconductor ETF.
Demand for semiconductors is being driven by greater use of electronic devices which includes servers for cloud computing, chips for artificial intelligence and robotics, video game consoles and PCs, and electric cars.
Due to this demand story and the rise of technology stocks such as Tesla, we have seen massive bullish moves in Semiconductor related businesses.
The ETF holds 30 companies fully replicating the Solactive Global Semiconductor 30 Index. The fund has no Australian allocation.
SEMI Share registry: Computershare. Through Computershare, you can manage your holdings and communications, and also select whether or not to reinvest distributions.
SEMI 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.
SEMI ETF Portfolio Goal
SEMI aims to provide investors with a return, before fees and expenses, that tracks the performance of the Solactive Global Semiconductor 30 Index.
The Solactive Global Semiconductor 30 Index contains 30 companies in developed markets, Taiwan and Korea from across the semiconductor value chain. These include: foundries, fabless, equipment makers, and integrated device manufacturers.
"ETFS Semiconductor ETF offers investors exposure to the world’s leading semiconductor companies, right through the value chain"ETF Securities
SEMI ETF Benchmark Index
ETF Securities SEMI ETF is benchmarked against the Solactive Global Semiconductor 30 Index. SEMI uses a full-replication strategy to track the index, meaning that it holds all the shares in its index. Its weightings are capped at 10%, meaning each company may take no more than 10% of the portfolio each time the index is rebalanced.
The index is rebalanced quarterly and serves to Represent companies that have business operations in the global semiconductor industry.
Companies in the semiconductor industry and its semiconductor equipment and services and semiconductor manufacturing subsectors are eligible for inclusion.
The index considers companies listed within developed countries including South Korea, and Taiwan, and a market capitalization of at least $1 Billion.
- Index Inception: 26/07/2021
- Tracking from: 08/05/2006
- Holdings: 30
- Goal: Represent companies that have business operations in the global semiconductor industry.
- Rebalancing: Quarterly
Should I Buy SEMI ETF: Holdings
HGEN has a total of 30 holdings, all of which are equities. This seems like a small number of holdings for an ETF and is unclear how well this represents the global Semiconductor space. We can see a large allocation to US accounting for 65.48% of the fund.
Across competitive funds, we do see a number of significant Semiconductor businesses that are not represented in SEMI. ASX. One notable exclusion from the fund is ASE Technology which is a Taiwan-based holding company listed on the NYSE that provides semiconductor assembly, packaging, and testing services. This group has a market cap of $9.7 Billion and revenues of $13.7 Billion. As such, the limited 30 companies seem to discriminate against a lot of large relevant companies.
SEMI ETF Fees
- Management Fee: 0.57% p.a
- Indirect Costs: 0%
- Bid/Ask Spread: Unknown
How are SEMI 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 ETF Securities. 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 their AMMA statement at tax time you can see the full details of this.
SEMI ASX Bid-Ask Spreads
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.
Since SEMI 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.
Minimize Fees with Low-cost flat free brokerage
To help boost returns and cut fees, consider using low-cost flat-free brokers such as pearler. Sign up using our link below for the best deal.
Should I Buy SEMI ETF: Performance
In the below table we set out the returns of SEMI compared SOXX iShares Semiconductor ETF, which is the largest Semiconductor ETF in terms of AUM. Currently, there is a clear lack of data available for SEMI, which was started just a few months ago.
We have also compared the performance of SEMI to several other popular ETFs. They are expressed as average returns per annum.
|1 year||3 years||5 years||10 years||Inception|
As we can see above, SOXX has had great historic returns. The graph below further compares the price movements of SOXX compared to the MSCI World index.
In the below graph we see the price returns of the SEMI benchmark index in comparison to the MSCI World index over the past year. We can see a history of solid returns since the inception of the index, and notably excellent bullish movements post COVID-19.
SEMI ASX Competitors
Internationally there are a large number of Semiconductor ETFs. iShares Semiconductor ETF is the largest fund in terms of AUM at $7.6 Billion and fees of 0.43%. This fund was created in 2001 and has 35 holdings.
Across the ETFs we can see that SEMI is sitting slightly above the market average fee of 0.55%. SEMI's fee of 0.57% represents $57 per $10,000 each year. The most competitive fee across the funds is 0.35%.
Should I Buy SEMI ETF: Prophet's Take
The Semiconductor ETF, SEMI is the first and only ASX listed Semiconductor thematic ETF. This fund has been created to help investors gain exposure to the Semiconductor space. We can see the semiconductor space has grown massively with excellent revenue growths which have translated to market-beating returns from semiconductor ETFs. However, it is important to keep in mind that past performance doesn't necessarily indicate future returns.
Semiconductors have been become a hot topic for investors due to the increase in technology stocks and the rise of electronic vehicles. Semiconductor companies have benefitted massively from the rise of technology. ETFs have been an excellent option for investors to indirectly benefit from the technology boom and the uprising of electric vehicles which use 2.3x more semiconductors than standard cars.
Although SEMI is the only Australian domiciled semiconductor ETF there are a large number of international competitors which allow investors to get access at a cheaper management fee. Investing in these options will however bring currency risks which could be seen a positive or negative.