5 top-performing ETFs over 5 years

Australia’s ETF sector pushed past a record $156 billion in funds under management earlier this year. This was underpinned by its strongest-ever 12 months of inflows, with investors tipping in more than $26 billion by the end of August 2023. This is an increase of 20% year-on-year, according to a combination of ASX and Cboe data analysed by ETF provider Betashares.

What’s driving this?

Since ETFs were first developed in 1987 and listed on the NYSE, investors have prized them for their efficiency, low cost, and liquidity attributes.

And in the decades following the Black Monday financial crisis (which wiped an estimated US$1.71 trillion from global markets and spurred the creation of ETFs – a point emphasised in a recent interview with State Street Global Advisers’ Kathleen Gallagher), the trickle of products has become a deluge. The number of exchange-traded funds globally is now north of 8,754, from just 276 in 2003, according to Statista.

In Australia, the number of exchanged-traded products has grown from 90 to more than 300 between 2013 and 2023. The local ETF industry holds a combined $7 billion of funds under management, representing a staggering 1800% increase over a decade.

Note: “Exchange-traded products” refers to the full range of listed investment vehicles. These include passive ETFs, ETMFs, and listed investment companies. In the following, we’re focused solely on ETFs.

To whet your appetite, here's the breakdown of Australian investor dollar flows into the various asset classes in the 12 months to the end of August.

 Source: Betashares, ASX, CBOE

"It's all about liquidity"

Liquidity is one of the key attractions for ETF investors - alongside their relative simplicity and lower cost versus direct shares and managed funds. 

Because trading is available intra-day, investors “can get in easy and that’s all about the liquidity,” State Street Global Advisers’ Gallagher told Livewire Markets in July. Gallagher also highlighted the availability of both primary and secondary markets for buying and selling ETFs.

“It’s become investors’ go-to vehicle when markets are under stress and they need to navigate through the uncertainty,” Gallagher said.

In our current period of persistent inflation and elevated interest rates – combined with geopolitical concerns including the Russia-Ukraine war and more recent heightened Middle East tensions, it’s perhaps easy to see why interest in ETFs has been so buoyant.

When Livewire spoke with Gallagher, Australian ETF inflows were concentrated within defensive asset classes, including fixed-income vehicles. While this category remains popular, August was is the first month in a while that broad-based ASX ETFs have topped category inflows.

Top-performing Australian ETFs over five years

Delving into individual products, the following ETFs were the five top performers over the last half-decade. But it should be noted that many funds launched within this period (that is, they're not yet five years old) have outperformed over shorter timeframes.

Note: Past performance is no guarantee of future returns. The following is general information only and shouldn’t be considered a recommendation or endorsement – speak to your own financial adviser before making any portfolio changes.

Source: Betashares, ASX, CBOE.

#1 Betashares NASDAQ 100 ETF (ASX: NDQ)

• Five-year performance: 19.19% (as of 29 September)

• Total assets: $3.24 billion (as of 5 October 2023)

• Launch date: 26 May 2015

• What it costs: 0.48%

Summary: Comprising 100 of the world’s largest non-financial companies, this fund pulls together a collection of stocks in technology, consumer services and other growth-oriented businesses that dominate the Nasdaq. These are companies from sectors that are under-represented in the Australian market.

Top five holdings, as of 6 October 2023:

1. Apple Inc (NASDAQ: AAPL)

2. Microsoft Corp (NASDAQ: MSFT)

3. Amazon.com(NASDAQ: AMZN)

4. NVIDIA Corp (NASDAQ: NVDA)

5. Meta Platforms (NASDAQ: META)

#2 VanEck Morningstar Wide Moat ETF (ASX: MOAT)

• Five-year performance: 16.46%

• Total assets: $615.97 million

• Launch date: 26 June 2015

• What it costs: 0.49%

Summary: MOAT provides exposure to a portfolio of 50 US companies that Morningstar’s global equity research team regards as holding “wide economic moats”. This is a metric that combines several attributes, with an emphasis on those that possess sustainable competitive advantages, in addition to Morningstar’s fair value estimate.

Top five holdings, as of 8 October 2023:

1. Alphabet Inc (NASDAQ: GOOGL)

2. Comcast Corp (NASDAQ: CMCSA)

3. Tyler Technologies (NASDAQ: TYL)

4. Intercontinental Exchange (NASDAQ: ICE)

5. Veeva Systems (NASDAQ: VEEV)

#3 BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

• Five-year performance: 16.17%

• Total assets: $2.59 billion (as of 6 October 2023)

• Launch date: 5 January 2017

• What it costs: 0.59%

Summary: ETHI tracks the performance of a basket of large global stocks identified as “climate leaders”. The index excludes companies whose operations are linked to fossil fuels, either directly or indirectly, and that don’t satisfy other sustainable investing criteria. Global technology and financials comprise more than 50% of the index, as of 29 September. The US market represents more than 70% of the ETF’s exposure.

Top five holdings (the following companies comprise more than 15% of the total portfolio):

1. NVIDIA Corp (NASDAQ: NVDA)

2. Apple (NASDAQ: AAPL)

3. Visa (NASDAQ: V)

4. Mastercard (NYSE: MA)

5. The Home Depot (NYSE: HD)

#4 VanEck MSCI International Quality ETF (ASX: QUAL)

• Five-year performance: 14.79%

• Total assets: $4.07 billion (as of 9 October 2023)

• Launch date: 29 October 2014

• What it costs: 0.40%

Summary: Holding 299 securities, QUAL tracks the performance of the MSCI World ex Australia Quality Index in Australian dollars, with all dividends reinvested. A traditional market-cap weighted index, it aims to capture the performance of quality growth stocks by identifying companies with high-quality scores based on three main fundamental variables: high return on equity; stable year-on-year earnings growth, and low levels of debt.

The three biggest sectors in the index are Technology, Healthcare and Industrials, which comprise almost 65% of the total. The US is the biggest country exposure, representing 77% of the total, followed by 5% and 3% in Swiss and Japanese companies.

Top five holdings (the following comprise more than 20% of the total index):

1. NVIDIA Corp (NASDAQ: NVDA)

2. Microsoft Corp (NASDAQ: MSFT)

3. Apple (NASDAQ: AAPL)

4. Meta Platforms(NASDAQ: META)

5. Eli Lilly Co (NASDAQ: LLY)

#5 BetaShares Resources Sector ETF (ASX: QRE)

• Five-year performance: 14.74%

• Total assets: $176.43 million (as of 9 October 2023)

• Launch date: 10 December 2010

• What it costs: 0.34%

Summary: QRE aims to track the performance of the Solactive Australia Resources Sector Index, with Solactive a German provider of financial indices. The index holds some of the ASX’s biggest names in one of its largest sectors, Resources.

Companies in metals and mining, oil and gas, and gold comprise more than 87% of the index.

Top five holdings (the following companies make up more than 70% of the index, led by BHP's 40% weighting):

1. BHP Group (ASX: BHP)

2. Woodside Energy Group (ASX: WDS)

3. Rio Tinto (ASX: RIO)

4. Fortescue Metals Group (ASX: FMG)

5. Santos (ASX: STO)

This article was originally published for Livewire Markets on Wednesday, 11 October 2023.