Question 1: I’m a little worried about that the impact of the Coronavirus on the share market. How can I protect my share portfolio? I have read about an ETF from Betashares called BEAR – how does this work?

Answer: An easy way to get broad market protection is to buy exchange traded funds (ETFs) designed to profit from a falling share market. These are actively managed funds that invest in derivatives, such as ASX SPI 200 futures contracts.

BetaShares has two funds: the BetaShares Australian Equities Bear Hedge Fund (which trades on the ASX under the code BEAR), and the BetaShares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ).

BEAR seeks to generate returns that are negatively correlated to the share market (as measured by the S&P/ASX 200 Accumulation Index). On a given day, the Fund’s exposure should correlate to between 90% and 110% of the share market’s movement. So if the ASX falls by 1%, the value of BEAR units should rise by 0.9% to 1.1%. If the ASX rises by 1%, the value of BEAR units will fall by about 1% (between 0.9% and 1.1%). All monies are invested in cash or as collateral with the ASX for the derivative contracts.

Management costs for the Fund are 1.38% pa.

Question 2: Can you tell me what’s going on with Speedcast International (SDA), which has not traded on the ASX for the past three weeks. Have they gone bankrupt?

Answer: Speedcast (SDA) provided a trading update on 3 February and announced the resignation of the Managing Director. On 5 February, they were suspended from trading on the ASX (at Speedcast’s request). The stock remains suspended (Speedcast requested a further extension today). I don’t think they have gone bankrupt, but my guess would be that they are finalising their accounts and trying to raise capital. Any capital raise will be at a greatly discounted price to the last price on the ASX

Question 3: I have an SMSF and my son wants to join the fund. How do we go about adding a new member and how does he transfer his balance to my fund?

Answer: Firstly, you can only have four members – so there needs to be room. Your son will become a Trustee of the Fund, so it is important that he understands the obligations he is taking on (he can read more about these on the ATO website). He will also need to sign a Trustee Declaration (where he attests to the obligations he is taking on) – this form must be retained by the Fund.

If your Fund has a corporate Trustee (i.e. a company), he will need to become a Director of the Trustee Company. The Company will need to notify ASIC.

If your Fund has individuals as Trustees, you will need to change the legal holding name for each investment. Rather than ‘John & Mary Smith as trustees for The Smith Family Super Fund’, the name will change to ‘John and Mary and Son Smith as trustee’ for The Smith Family Super Fund’. This can be a pretty painful process – one of the reasons we recommend having a company as the trustee.

Finally, the funds transfer should be easy. There is a standard form to complete that he gives to his existing super fund – they are obliged to transfer the funds within seven days.

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.