New global ETF offers exposure to royalties

BetaShares has launched a new exchange traded fund that will offer investors exposure to global companies that derive a significant portion of their revenue from royalty, royalty-related, or intellectual property (IP) income.

The ETF (ROYL) tracks the Solactive Global Royalties Index and invests in 30 companies, the majority (85 per cent) of which are located in the United States or Canada. Sector representation is across oil, gas and consumable fuels; metals and mining; entertainment; and pharmaceuticals.

BetaShares says that royalty companies have generally displayed an attractive risk-return profile and maintain exposure to potential revenue growth of a business but have limited exposure to the operational risks of the companies their royalty payments are generated from.

"We believe royalty companies are one of the best kept secrets in finance. For many investors, royalty companies have tended to fly under the radar despite their long history of value creation," Alex Vynokur, BetaShares chief executive officer, said.

"The innovative nature of ROYL offers investors exposure to the royalty income associated with cutting edge pharmaceutical drugs, carbon credits, the music of hit artists like Sting, Bob Dylan and David Bowie as well as the extraction of gold, precious metals and iron ore."