Question 1: We are looking to add some more diversification to our SMSF and have been considering Vanguard Diversified High Growth Index ETF (VDHG). This would also provide some international exposure. We already hold some shares in Vanguard High Yield Fund (VHY) and have been very happy with their performance to date. What are your thoughts on VDHG?
Answer: The Vanguard Diversified High Growth Index ETF (ASX: VDHG) invests in underlying Vanguard index funds according to a strategic asset allocation. 90% is weighted to growth assets, 10% to income assets. The management fee is 0.28% pa.
Within the growth assets, there is a big bias to international shares. Overall, 36% is weighted to Australian shares and 54% to international shares. Of that, about a quarter is currency hedged. For the 10% income assets, 3% is Australian fixed interest and 7% is international fixed interest.
My caution on VDHG is the allocation to international shares (and no active managers), and the small amount that is currency hedged.
There are many other ways you can get access to international shares. Have a look at this article.
Question 2: I would appreciate your view on 29M. Should I hang on to the holding or take profit at this point in time?
Answer: It is hard to see why a mining company doing an IPO in early July at $2.00 should trade a few months later nearer to $3.00. Obviously, higher zinc and marginally higher copper prices have helped. Maybe a view that one of the mines will produce higher grades of metal?
The major brokers seem to like it. According to FN Arena, the three major brokers who cover 29M each have overweight/outperform recommendations. The range of target prices is $3.10 to $3.60, with a consensus of $3.28, 19.8% above the last ASX close of $2.74.
I would be tempted to take profits.
Question 3: What are CHESS Depositary Interests or CDIs?
Answer: Chess Depositary Interests allow non-Australian companies to list their shares on the ASX and use the exchange’s settlement systems. It is a second or third listing, with the primary listing being offshore. The CDIs can usually be converted into the primary share.
Examples of companies with CDIs include Resmed (RMD), Avita (AVH) and Virgin Money UK PLC (VUK).
Question 4: Should I take up my Aristocrat Leisure (ALL) entitlements?
Answer: Aristocrat Leisure is raising $1.3bn to help with the purchase of Playtech, a gaming software and services company. New shares are being issued at a price of $41.85 on a 1:20.56 basis (if you own 1,000 shares, you will have 49 entitlements).
The institutional part of the offer went exceedingly well, with 92% of entitlements taken up and the balance auctioned off and clearing at an extraordinary price of $47.10. Taking that lead, you would take the entitlements up – offer closes on 8 November.
If you didn’t have the cash or had other concerns, you can sell your entitlements on the ASX (they will trade under the ticker ALLR – trading ceases on 1 November). Alternatively and probably the worst option, do nothing and let your entitlements be auctioned – this is scheduled to occur around 11 November with payment around 18 November.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
