Buy Hold Sell

10 adviser-approved ETFs for 2024

Mon 25 Mar 24, 9:05am (AEST)
20240314 BHS3 Primary
Source: Livewire Markets | Adam Dawes from Shaw and Partners and Andrew Wielandt from DP Wealth Advisory

Key Points

  • Adam Dawes from Shaw and Partners and Andrew Wielandt from DP Wealth Advisory talk the rise of ETFs in Australia, cautioning popularity doesn't guarantee effectiveness
  • Top ETF picks include iShares Global 100 ETF for growth, VanEck Global Listed Private Credit for income, and Global X S&P Biotech for value with thematic copper and uranium ETFs were also recommended

By now, you’re probably aware of the stats highlighting the growth of ETFs in Australia (if not, they’re available here).

Alright, alright already, we get it… they’re very popular.

But just because something is popular, doesn’t always mean it is good, or that people know how to use it effectively (think Q-tips, running shoes, and Taylor Swift songs).

So, for this latest episode of Buy Hold Sell, we reached out to two advisers - people actually using these products in client portfolios – to get their take on the good, the bad, and the ugly across various factors and investment styles.

Be warned: When long-time friends Adam Dawes from Shaw and Partners and Andrew Wielandt from DP Wealth Advisory are together in the same room, there are often a few laughs to be had.

But you will also get practical and sound guidance, free from any spin – these two call it how they see it. So make sure to watch the video to find out Adam and Andrew's top ETFs for growth, income, value, and quality - as well as the thematic ETFs they actually like right now.

Note: This episode was recorded on Wednesday 13 March 2024 and first appeared on Livewire Markets. You can watch the video, listen to the podcast, or read an edited transcript below.

Other ways to listen:

Edited Transcript

Ally Selby: Hey, how are you doing? And welcome to Livewire's Buy, Hold, Sell. I'm Ally Selby, and today, we're joined by two financial advisers for the top ETFs they're recommending across a variety of factors, including quality, growth, income and value. To do that, we're joined by Andrew Wielandt from DP Wealth Advisory, and Adam Dawes from Shaw and Partners.

Just to start today, let's go back to basics. What's the difference between an active and passive ETF, and why should investors take notice of factors? Andrew, I'm going to start with you.

The difference between an active and passive ETF, and why should investors take notice of factors

Andrew Wielandt: Well, let me define briefly what a passive one is because that will help with active. So a passive is you're just literally following an index. So the easiest one in Australia, the first ETF in Australia, was ASX: STW (SPDR S&P/ASX 200 Fund) from State Street. And if you want to replicate the ASX/S&P 200, you're watching TV at night – “What did the market do? Did it go up or down? Oh yeah, the ASX/S&P 200 was down 20”, then you just buy STW. So that's a passive one. That's really simple.

If you're trying to be a bit more active, you're looking at factors or determinants of share price. So there's a number of different determinants of share price, growth, income, value, momentum, low vol, quality of course - there's a whole range of them. Then you might look at an ETF that has a particular focus on a factor. And when we build portfolios, and I'm sure Adam's the same, you're making a blend. So you have say, two-thirds, which is passive, and then you might have one-third that's active, and that blended return together gives you a smoother return, rather than just loading up full of thematic ETFs, which one year might go up 40% and go down 20% the next year. Or equally so, with due respect to a snoozy passive portfolio - which is great if you're mature and don't have your own teeth - but perhaps if you're a little bit younger, you're looking for something a little bit more punchy. So that's sort of where the active and the passive play together.

Ally Selby: Adam, over to you. Question without notice, which factor do you feel like would be most appropriate for the environment we're in right now?

Adam Dawes: It's a tough one. I think overall, Australia is very much commodity-based, so there are lots of factors that are going into ETFs that are very much commodity-based. But then, also, we've got lots of tech exposure over in the US, and that's had a fantastic run as well. So I think overall, some of those factors, you just got to be a little bit careful, because these ETF providers put these ETFs out when it's the flavour of the month, or it's the next big thing. So some of those things you just need to be a little bit careful of. So overall, I think, some of those factors, tech is really a great place to continue to look. And certainly, I think some of the copper ETFs, there's a really good one, WIRE, and I think that thematic is going to be very good going forward, as well.


Ally Selby: Okay. Andrew, I'm going to start with you today. What ETF do you typically recommend for people looking for growth in portfolios?

Ishares Global 100 ETF (ASX: IOO)

Andrew Wielandt: So another one in my self-managed super fund - so that's my disclaimer - so it's IOO from iShares, or from BlackRock. As the name suggests, it buys the top 100 companies globally. So with due respect to Australia, and Adam just nailed it perfectly, we're full of banks, we are full of resources, and a little bit of healthcare. Tech, which overseas or in the US is about 29-30% of the index. We'd be lucky for it to be 2.9% of our index here. And yet, if you think about all the things that are coming at us - driverless cars, AI, all that sort of stuff - so IOO is going to give you exposure to a whole range of companies, but in particular, that tech complex as well. Again, it is un-hedged, so if you're worried about the dollar, you'd think about IHOO. But certainly in my super fund, the second-largest holding is IOO.

Ally Selby: Okay, over to you Adam. What's your favourite ETF for growth?

Hyperion Global Growth Companies Fund (Managed Fund) (ASX: HYGG)

Adam Dawes: So my favourite ETF for growth is a managed fund, so it's an ETMF (exchange-traded managed fund), but it's Hyperion Global Growth, HYGG. It's absolutely killed it, continuing to kill it, and it will do very, very well. These guys look at that growth component in the US, and that's how I get a lot of our growth exposure going forward. Very disciplined in their investment mandates, understanding what's going on in the market. We see these guys every three months to make sure that they're keeping up with what they're saying they're going to do. I really think that's a fantastic growth one. For my portfolio, that's HYGG.

Ally Selby: Okay. On the other side of the spectrum, Adam, which ETF do you typically recommend for consistent and reliable income?


VanEck Global Listed Private Credit (AUD Hedged) ETF (ASX: LEND)

Adam Dawes: Yeah, it's a little bit of a different one there because the income that you get is quite good. But again, it's the cost of that capital that I think that you've got to be a little bit careful of. I think, overall, income as a whole is quite good. And one of the ones - and I'm going to go a little bit different here - it's one called LEND. It's a new one from VanEck. They pay quarterly dividends, but it's getting access to private credit, and that private credit does provide great income going forward. We're seeing too many businesses now moving away from the listed side of things, but going into the private market, and getting very good results going forward. And this is one way to capture the private credit market, but also getting that quarterly distribution as well. So LEND would be my pick for that one.

Ally Selby: Okay. Over to you Andrew. What's your top income ETF?

Vanguard Australian Shares High Yield ETF (ASX: VHY)

Andrew Wielandt: Vanguard's VHY is probably the simplest one. I really like LEND. LENDS's only new, and so as a consequence, we are just sort of ... Any new ETF regardless of whoever the issuer is, we just like a couple of months for it to settle. But on face value, given the yield and the thematic, I really like it. But Andrew, the boring - my favourite type of ice cream is vanilla - is Vanguard's VHY. 72 companies, 5% dividend, paid quarterly, rebalanced every 90 days. Doesn't hold a listed property trust or REITs in there, so it's just a really simple, vanilla, boring-type of ETF.


Ally Selby: Okay. Value has been really out of favour over the last maybe 18 months. For those who want to be a little bit contrarian, which ETF do you recommend for investors looking for value?

Global X S&P Biotech ETF (ASX: CURE)

Andrew Wielandt: It's an interesting one, Ally, because the one I'm about to say to you is actually a growth one, but it is value, if that makes sense. It's in value because it's cheap, but it's actually got a growth focus. So I'm not sure if you're going to let that one through the editing suite. The one that I quite like is CURE, and CURE - from Global X, from memory - actually follows the S&P biotech and healthcare index. So if you have a look at it over the last three years, it's returned minus 3% per annum. So it's been underwhelming. Underwhelming. But in the context of, if you think about all that technology, so when I started here 26 years ago - hard to believe - the average life expectancy of a male was 74. The average life expectancy of a female was 86. Today, it's 82 and 96. And part of that, apart from we're all clean living, et cetera, is because ... I'm pointing at my learned friend.

Adam Dawes: Well, thank you. Yes, thank you.

Andrew Wielandt: Is around the fact that we've had big increases in technology around that healthcare space. And without trying to be controversial, you have a look at the COVID vaccine and all the technology that went into that mRNA technology. And now, that's now being rolled out into other diseases and ailments as well. Over the last three months, it's up about 20%. So you can actually see it's really starting to turn around. So it's actually a growth ETF that's just starting to sort of get its act back into gear. So it's not value in the context of a value one, but for bang for buck, I think CURE's really one that people should be thinking about.

Ally Selby: Okay, over to you, Adam. What's your value or contrarian style ETF?

Australian Equities Strong Bear Hedge Fund (ASX: BBOZ)

Adam Dawes: Yeah, so contrarian style I guess is probably a little bit better because there's the BBOZ, which is basically a buying a put on the market. So when markets are going like this, BBOZ goes lower. But it's a way for investors to get access to if the market, if you think the market's going to fall or rollover, a contrarian view would say that the market is a little bit frothy, and you could take advantage of that downward spiral. So BBOZ for the Australian market, and there's BBUS for the international markets, where if people don't have options accounts, and all those kinds of things, you can actually buy a put on the market. And if the market falls, the value of that ETF will go higher. So that's my contrarian view.

Ally Selby: Quick follow-up question from that. Have you actually been adding that to client portfolios recently?

Adam Dawes: No, not yet, because the market has been very, very good for the last three to six months. So I think what you'd look to be doing is that closer to June or July, August, when interest rates don't come down, which everybody's saying it's going to come down, I think that's when you'd start to look at that contrarian view of the market, and potentially taking a position, because if those interest rates don't come down and inflation doesn't come down, that's the perfect storm for this market to re-rate to the downside.


Ally Selby: Next up, today, we have quality. Adam, which ETF do you typically recommend for those looking to add quality to their portfolios?

VanEck MSCI International Quality ETF (ASX: QUAL)

Adam Dawes: So quality is in the name, QUAL. I'm sorry, but that's the one, it has everything that you need. It's a quality ETF. These guys have done very, very well. Andrew can tell you more about it because it's really his pick. But I think QUAL is a fantastic one to go forward in client's portfolios.

Ally Selby: Okay. I'm guessing it's QUAL for you too then?

Andrew Wielandt: Ally, it's always like you read my mind.

Ally Selby: Surprise, surprise.

Andrew Wielandt: QUAL, the one ETF to rule them all. It's from VanEck. It's got about 200-odd companies in there. Strong return on shareholders' funds, steady to increasing debt, steady to increasing earnings. It's up about 40% for the year. It's a core holding in my self-managed super fund. It's a core holding in my client's portfolios. It's the best quality one out there.


Ally Selby: Thematic ETS don't have the best track record. I feel like a lot of them launch just when a theme is hitting its peak. Is there a thematic ETF that you feel investors should be taking a closer look at right now?

VanEck MSCI International Small Companies Quality ETF (ASX: QSML)

Andrew Wielandt: So Ally, I think, it's not so much a thematic, maybe it is a thematic, maybe Adam can help me a little bit with this one, it's small caps. So if you look at small caps, small companies have had a dreadful performance over the last 10 years in part due to the fact that these mega caps, the magnificent seven, or what is it now? Magnificent five? Because Apple and Tesla have dropped away a little bit? And so, all these small companies have just been left behind. But if you look at it from a value proposition - there we go, answering the value question - then potentially small caps is a place you should be looking at. So we'll call small caps a thematic for the sake of this question, so the one that I really like is QSML. And I know you'll find this hard to believe, Ally and Adam, but it's actually a quality overlay on small caps.

Adam Dawes: There you go.

Andrew Wielandt: So it's exactly the same thing we were talking about when we were talking about QUAL, strong return on equity, high revenue, falling debt, but in that small company space. And relative to the index, it's just absolutely smashed it. So to me, small caps are certainly a place where the market hasn't really been focused on. And I think you mentioned earlier, Adam, that if the market does start to see interest rates coming off, and if we avoid recession, and these mega caps have done really well, then the market will start changing focus and looking for these small companies. But with due respect to small companies, there's going to be some good ones and bad ones. The way to protect yourself is to have a quality overlay so that you're finding the better ones in there. So mine would be QSML.

Ally Selby: Okay, love that one. Over to you, Adam. Is there a thematic ETF that you recommend investors take a look at, or maybe they should be buying right now?

Global X Copper Miners ETF (ASX: WIRE) and Betashares Global Uranium ETF (ASX: URNM)

Adam Dawes: I don't think I'm going to pick one, but I'm going to pick two. But anyway, so you're talking before about thematic ETFs, and then the thing actually disappearing. So, Bitcoin is a classic example, and CRYP, which is the Betashares one, be careful with that one because obviously Bitcoin's run, and now, potentially, where's it going to go? But that wasn't my pick, so that was the bonus one. My two picks are WIRE, which is a copper ETF. We think the copper thematic is going to continue with building new wind farms, all of that energy transition. We need copper, and that's a fantastic one. And also URNM, which is the uranium one. I still think that theme has still got a long, long way to go. And with a clean energy tilt that we need to have, both of them are in that clean space, I think both of those ETFs have got a very good future.

Ally Selby: Okay. Well, I hope you enjoyed that episode as much as I did, and that you found it incredibly helpful. If you did, remember to subscribe to our YouTube channel, and don't forget to give this episode a like.

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Buy Hold Sell

Buy Hold Sell is a regular video series where Australia's leading professional investors share their views on Australian and Global Shares. This content is produced by Livewire Markets and has been syndicated to the Market Index website.

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