Risks and Rewards: What Investors Should Know About VanEck’s GCAP Active ETF

Introduction to the Fund and Strategy

VanEck Investments Limited has issued a replacement Product Disclosure Statement (PDS) dated 10 June 2025 for its VanEck Bentham Global Capital Securities Active ETF, trading on the ASX under the code GCAP. This actively managed Exchange Traded Fund (ETF) offers investors access to a globally diversified portfolio of Capital Securities, primarily subordinated debt and hybrid instruments issued by systemically important financial institutions in developed markets.

The Fund aims to deliver an after-fee return exceeding the Reserve Bank of Australia (RBA) cash rate plus 3% per annum over the long term. It achieves this through an active investment strategy managed by Bentham Asset Management Pty Ltd, a specialist fixed income and credit manager with a strong track record in income generation and risk management.

Investment Universe and Management Approach

Capital Securities, the Fund’s primary asset class, include Tier 2 and Additional Tier 1 capital instruments such as contingent convertible bonds (CoCos), preferred shares, hybrid securities, and subordinated notes. These securities sit below senior debt but above equity in the issuer’s capital structure, offering higher yields to compensate for their increased risk profile.

Bentham employs a combination of top-down macroeconomic analysis and bottom-up credit research to actively manage the portfolio. The Fund maintains flexibility to invest up to 10% in government and semi-government bonds, and an additional 10% in asset-backed securities including residential mortgage-backed securities and collateralised loan obligations. Currency exposure is typically fully hedged back to the Australian dollar to mitigate foreign exchange risk.

Liquidity, Transparency, and Trading

The ETF Units are traded on the ASX under the AQUA Rules, which provide a tailored regulatory framework for managed funds and ETFs. Liquidity is supported by an appointed Market Maker who facilitates buying and selling throughout the trading day, helping to keep prices close to the Fund’s net asset value (NAV). Investors benefit from daily transparency of portfolio holdings published on VanEck’s website and the ability to trade ETF Units like shares with immediate price access.

Fees, Dividends, and Risks

The Fund charges a management fee of 0.59% per annum and a performance fee of 15.5% on returns above the benchmark (RBA cash rate plus 3%). Transaction costs are estimated at 0.01% per annum. Dividends are expected to be paid monthly, with an optional Dividend Reinvestment Plan allowing investors to reinvest income into additional ETF Units.

Investors should be aware of the inherent risks associated with subordinated debt securities, including credit risk, liquidity risk, interest rate risk, call risk, and the possibility of loss absorption mechanisms that can convert debt to equity or write down capital in times of issuer distress. The Fund is suitable for investors who understand these risks and seek income with diversification benefits.

Regulatory and Operational Framework

The Fund operates as a registered managed investment scheme regulated by ASIC and complies with the AQUA Rules on ASX. VanEck Investments Limited acts as the Responsible Entity, overseeing the Fund’s operation and administration, while State Street Australia Limited serves as custodian and administrator. MUFG Corporate Markets (AU) Limited maintains the register of Unitholders.

The PDS replaces the previous disclosure document and includes comprehensive information on the Fund’s investment strategy, risks, fees, taxation implications, and operational procedures. Investors are encouraged to consult financial advisers to assess suitability based on individual circumstances.