As an investment vehicle, an exchange-traded fund (ETF) typically provides low-cost, highly liquid, highly diversified and immediate exposure to specific asset classes.
At the end of August 2020, there were more than 200 exchange-traded products listed on the ASX – more than twice as many options as there were just five years ago. And exchange-traded products represented an all-time high of more than $70 billion of assets under management.
That means it’s becoming harder to evaluate what are the best Australian ETFs.
Six Park’s investment team spends significant time analysing the best ETFs in Australia and regularly reviews Australian ETF performance to ensure the ETFs we use to construct our clients’ investment portfolios are the best in the market.
Here we have chosen the top ETFs in Australia covering different asset classes from reputable issuers such as Vanguard Australia, Blackrock, Betashares, State Street and Van Eck.
Best ETFs Australia – ETF Comparison
Australian Shares
ETF State Street S&P/ASX 200 Fund |
Ticker STW |
Focus Australia’s first ETF. Tracks the 200 largest and most liquid publicly listed entities in Australia |
Examples of top holdings CSL, Commonwealth Bank, BHP Billiton, Westpac, NAB, ANZ, Woolworths, Wesfarmers, Telstra, Transurban |
Why we assess this as the best ETF for Australian Shares
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Sustainably Oriented Australian Shares
IESG is used for exposure to Australian shares in Six Park’s sustainable portfolios.
ETF iShares Core MSCI Australia ESG Leaders ETF |
Ticker IESG |
Focus Exposure to ASX-listed companies meeting a variety of sustainability criteria, while maintaining similar overall industry group weights as the S&P/ASX 200 Index. |
Examples of top holdings CBA, CSL, Wesfarmers, ANZ, Macquarie Group, Transurban, Sonic Healthcare, Telstra |
Why we assess this as the best ETF for Sustainably Oriented Australian Shares
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International Shares (Unhedged)
ETF Vanguard MSCI Index International Shares ETF |
Ticker VGS |
Focus Unhedged exposure to more than 1500 securities across 22 of the world’s major developed economies |
Examples of top holdings Microsoft, Apple, Amazon, Alphabet, Facebook, Johnson & Johnson, Nestle SA, JP Morgan Chase, Visa, Procter and Gamble Co |
Why we assess this as the best Australian ETF for Unhedged International Shares
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Sustainably Oriented International Shares (Unhedged)
VESG is used for exposure to unhedged international shares in Six Park’s sustainable portfolios.
ETF Vanguard Ethically Conscious International Shares Index ETF |
Ticker VESG |
Focus Exposure to more than 1,500 of the world’s largest companies listed in major developed countries (exc. Australia) that excludes companies that do not rank highly on a variety of sustainability/ESG criteria. |
Examples of top holdings Apple, Microsoft, Amazon, Facebook, Alphabet, Tesla, Visa, Nestle, Proctor & Gamble, Nvidia |
Why we assess this as the best ETF for Unhedged Sustainably Oriented International Shares
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International Shares (Hedged)
ETF Vanguard MSCI Index International Shares (Hedged) ETF |
Ticker VGAD |
Focus Hedged exposure to more than 1500 securities across 22 of the world’s major developed economies |
Examples of top holdings Apple, Microsoft, Alphabet, Amazon, Facebook, JP Morgan Chase, Johnson & Johnson, Visa, Nestle SA, Procter & Gamble |
Why we assess this as the best Australian ETF for Hedged International Shares
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Sustainably Oriented International Shares (Hedged)
IHWL is used for exposure to unhedged international shares in Six Park’s sustainable portfolios.
ETF iShares Core MSCI World ex Australia ESG Leaders (AUD Hedged) ETF |
Ticker IHWL |
Focus Hedged exposure to more than 700 of the world’s largest companies in major developed countries (exc. Australia) that rank highly as sustainability/climate leaders. |
Examples of top holdings Apple, Microsoft, Alphabet, Nvidia, Tesla, Home Depot |
Why we assess this as the best ETF for Unhedged Sustainably Oriented International Shares
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Global Listed Property
ETF SPDR Dow Jones Global Real Estate Fund |
Ticker DJRE |
Focus Tracks a range of over 200 real estate investment trusts (REITs) and real estate operating companies which are listed on major exchanges around the world and which meet certain environmental, social and governance (ESG) criteria |
Examples of top holdings Prologis, Digital Realty Trust, Public Storage, Equinix Inc, Avalonbay Communities, Equity Residential, Simon Property Group, Welltower Inc, Ventas Inc and Realty Income. |
Why we assess this as the best Australian ETF for Global Listed Property
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Global Infrastructure
ETF VanEck Vectors FTSE Global Infrastructure (Hedged) ETF |
Ticker IFRA |
Focus Invests in a diversified portfolio of infrastructure securities listed on exchanges of developed countries around the world |
Examples of top holdings Nextera Energy, Transurban Group, American Tower Corp, AENA SME SA, Atlantia SPA, Southern Co, Duke Energy Corp, Enbridge, Dominion Energy, Crown Castle International |
Why we assess this as the best Australian ETF for Global Infrastructure
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Emerging Markets Shares
ETF Vanguard FTSE Emerging Markets Shares ETF |
Ticker VGE |
Focus Provides exposure to 21 of the world’s emerging economies across Asia, Latin America, Europe, Africa and the Middle East |
Examples of top holdings Alibaba, Tencent, Taiwan Semiconductor Manufacturing, Samsung, China Construction Bank, Naspers, Ping An Insurance Group, Reliance Industries, Housing Development Finance Corp, China Mobile |
Why we assess this as the best Australian ETF for Emerging Markets Shares
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Australian Fixed Income/Bonds
ETF iShares Composite Bond ETF |
Ticker IAF |
Focus Invests primarily in investment grade fixed income securities |
Examples of top holdings Variety of fixed-income securities issued by Australian Federal and State Governments and certain investment-grade non-government entities |
Why we assess this as the best ETF for Australian Fixed Income/Bond
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High Yield Cash Assets
ETF BetaShares Australian High Interest Cash ETF |
Ticker AAA |
Focus Invests all its assets in high-interest bank deposit accounts with selected major banks in Australia |
Examples of top holdings Mix of at-call, notice account and term deposits (up to 90 days maturity) across major banks. |
Why we assess this as the best ETF for High Yield Cash Assets
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How Six Park chooses the best ETFs
ETFs can vary in a number of important ways. Six Park’s ETF comparison analysis considers factors such as:
- Cost;
- Performance;
- Liquidity;
- Spreads; and
- The track record of the ETF and its issuer.
The first consideration when evaluating ETFs should be what asset classes you want to include in your portfolio.That means determining the asset classes that you need exposure to, and in what proportions.
At Six Park, we start with a mean-variance optimisation model, which in simple terms is a data-driven process designed to determine the best asset mix for a given level of volatility or risk.
Once the asset allocations are decided upon, we then move to consider which ETF is best for the asset classes that have been selected.
Factors to consider include:
Cost
Issuers have to disclose the MER on each ETF and this fee (borne by the ETF) will be reflected in the price you pay.
ETFs are also required to separately disclose their net transactional and operational costs. These are the costs incurred by the funds for things like brokerage charges (for buying and selling the assets held by the ETF) and foreign exchange associated with the trading activities of the funds. As these costs are paid out of the assets of the ETF, they will be ultimately reflected in the ETF’s price.
Liquidity
It’s important to understand the assets you’ll be buying in an ETF and how liquid they are – that is, how easily can the ETF be quickly bought or sold at a price that closely reflects its intrinsic value. That will influence performance as well as the risk.
For instance, if you’re buying ASX200 stocks, they’re typically very liquid, so if you need to get out quickly, you still see pretty deep liquidity. But if you’re buying more esoteric exposures, it’s more difficult for the market makers to price those assets (as the underlying holdings in the ETF basket are less liquid) and that will be reflected in the prevailing prices and spreads.
Less liquid assets don’t trade as often so the price you may be able to sell at may be quite different to the last traded price.
Fund Structure
ETFs that are structured as “locally domiciled trusts” minimise the administrative burden on our clients who otherwise might have to file various overseas tax documents.
Some ETFs also lend out their underlying securities to institutional investors who might be seeking to short sell a stock (i.e. borrow a stock to sell it in the hope of buying it back cheaper in the future). Securities lending can modestly enhance an ETF’s return by bringing in extra fees, but it does introduce an element of additional risk.
Track Record of the ETF and its issuer
Most of Australia’s ETF issuers are large and well-established, have decent processes in place and have products that are commercially viable and acceptable. If everything else is equal, choose a larger ETF because once a fund reaches critical mass, there is less risk of them increasing their fees to cover costs or potentially even closing down and returning investor funds.
Can I choose the best Australian ETFs myself?
It might be easy to choose an ETF – but it’s not easy to be confident you’re choosing the best ETF.
At Six Park we provide multiple layers of service at a very low cost. First, there’s the asset allocation expertise, then there’s ETF selection, then we monitor the investments and the assets and ensure portfolios are rebalanced and are staying true to the underlying investment strategy.
It’s not impossible to do it yourself, but there’s a significant level of time and expertise involved in doing it well.
Six Park researches the best ETFs available and then builds your personalised portfolio based on your investment time frame and attitude and capacity for risk.
Interested in ETF investment? To receive a personalised investment recommendation, click the “Get started with Six Park” button below to take our free online assessment.