Anyone who wants to invest in ETFs will quickly come across the fact sheet – a compact overview of the most important features of a fund. But what is hidden behind it?
• Factsheet provides an overview of ETF key figures
• TER and fund volume are key decision factors
• Tracking Error and Difference show replica quality
What is an ETF fact sheet anyway?
The ETF fact sheet is basically a compact data sheet that summarizes the most important information about a fund on a few pages. However, unlike legally binding documents such as the sales prospectus or the Key Investor Information Document (KIID), a fact sheet is not required by law. Therefore, both structure and content can vary significantly depending on the provider.
As JustETF explains, most ETF providers update their fact sheets at least monthly and make them available for free on their websites. Despite the different designs, most follow a similar structure – from the master data to the performance and the composition of the ETF.
Understanding ETF fact sheets: basic data and key data
The header area of each fact sheet contains the essential information for identifying the ETF. Here you can find the full name of the ETF, the logo of the provider and the date of the fact sheet. Fact sheets are updated at least monthly for most providers.
The key figures in the “key data” section are particularly important. The WKN (Security Identification Number) or Valor and ISIN (International Securities Identification Number) enable the ETF to be clearly identified by the broker. The TER (Total Expense Ratio) indicates the annual costs in percent – a decisive factor for long-term returns. As ExtraETF points out, investors should always pay particular attention to the fund volume. ETF products whose assets under management remain below CHF 100 million for several years after the fund was launched are not profitable for the fund companies in the long term.
Correctly interpret performance
The performance presentation is one of the most important but also the most treacherous areas of a fact sheet. It is important not only to look at the beautiful return charts, but also to understand the key figures behind them. The tracking difference shows how closely the ETF tracks its index – the smaller this deviation, the better. The tracking error measures the fluctuation range of these deviations.
You should be careful when looking at historical returns: If it is a new ETF, the charts are often only retroactive calculations and do not correspond to the actual fund performance. In addition, the following generally applies: past performance is no guarantee of future returns.
Decipher composition and risk metrics
A central benefit of the fact sheet is the presentation of the ETF composition. These areas show which countries, sectors or individual stocks the money actually flows into. This is particularly relevant for Swiss investors as it allows them to check how heavily an ETF is invested in certain regions or currency areas.
The volatility provides information about the intensity of fluctuations in the ETF. Higher volatility means greater price fluctuations, but does not automatically mean worse returns. For bond ETFs, additional information can be found on the average term (duration) and credit quality of the bonds included.
Modern fact sheets increasingly also contain sustainability information.
Factsheet vs. legally binding documents
An important point that is often overlooked: As Finanzpedia explains, fact sheets can help to get an initial overview of the financial product, for example to be able to view the most important information on just a few pages. To be on the safe side, you should still look at the providers’ websites and the information listed there before making a purchase decision.
The fact sheet is primarily a marketing document. However, the sales prospectus and the KIID are legally binding. These documents contain all legally required information and are the relevant sources when making an investment decision. Fact sheets therefore primarily serve as an initial orientation and comparison aid between different ETFs.
It is advisable for investors to use the fact sheet as a starting point, but also to always consult the binding documents when making important decisions or to find out about current developments on the provider websites.
D. Maier / editorial team finanzen.net