ETFs

Greater exposure to global shares makes perfect sense

By Market Index
Fri 02 Sep 22, 2:55pm (AEDT)
Globe
Source: Unsplash

Key Points

  • The ASX is heavily weighted to the fortunes of a handful of financial and mining companies
  • International equities offer a much broader and exciting range of investment opportunities
  • Global and US equities have outperformed Australian equities over the past five and 10 years

Compared with the ASX, which is heavily weighted to the fortunes of a handful of financial and mining companies, global equities offer a much broader and exciting range of investment opportunities.

While Australia has one of the world’s highest rates of share ownership, the number who invest in global share markets, remains disproportionately low (at around 13%).

Why invest offshore

Given that the Australian share market represents a trifling 1.7% of global equity markets (by total capitalisation), the argument for allocating more of your portfolio to listed stocks beyond the local bourse is becoming increasingly compelling.

For starters, it allows you to tap into multinational companies with upside leveraged to global markets, rather than Australian companies limited to local or even regional markets.

This explains why international and US equities have outperformed Australian equities over the past five and 10 years.

Returns PA

Five years

10 years

Australian shares

7.2%

9.4%

US shares

13.8%

17.6%

Global shares

10.1%

14.1%

Source: Vanguard July 1992 to July 2022

Greater depth and diversity

While the opportunities available domestically on the ASX shouldn’t be underestimated, investing in international shares - to seek exposures unavailable within domestic multinational companies - should over the long-haul return in spades.

For example, one of the key benefits of investing within global share markets is the sheer depth and diversity of quality stocks within a myriad of sectors – like e-commerce, healthcare, broader industrial and industrial automation, AI, robotics, payments, or renewables to name a few - that either have little or no representation on the local market.

That’s especially true within the technology and innovation sectors, where the white space – the opportunity to meet as yet unrealised future needs, that’s been accelerated since covid - is colossal.

ETFs have democratised international investing

Unlike years past when investing in international shares was the exclusive domain of wealthy individuals or institutional investors, exchange traded funds (ETFs) now provide low-cost, accessible exposure to a diversified basket of international equities.

Three global ETFs offering exposure to growth sectors unavailable on the ASX

BetaShares Global Cybersecurity ETF (ASX: HACK): Offers local investors rare access to the burgeoning cybersecurity sector.

Hack aims to track the performance of an index (before fees and expenses) that provide exposure to key players within this sector including:

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Distribution: Semi-annual.

Management cost: 0.67%.

Net assets: $650m.

NAV: $8.54 (31/8/22).

Top three sector allocations include:

  • Systems Software 58.5%

  • Communications Equipment 12.5%

  • Research & Consulting Services 9.8%

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VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO): Gives investors exposure to a diversified portfolio of the largest and most liquid companies involved in video game development, esports and related hardware and software globally.

ESPO aims to provide investment returns before fees and other costs which track the performance of the Index. 

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Top three sector allocations include:

  • Entertainment 62.8%

  • Semiconductors & Semiconductor Equipment 15.2%

  • Interactive Media & Services 6.7%

Distribution: Annually.

Management cost: 0.55%.

Net assets: $74.9m.

NAV: $8.50.

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Hydrogen ETF (ASX Code: HGEN): offers investors exposure to the world’s leading hydrogen companies, with a focus on pure-plays.

Sometimes described as the “Swiss army knife” of decarbonisation, hydrogen contains three times more energy on a weight-for-weight basis than petrol while producing no carbon dioxide emissions.

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Top three sector allocations include:

  • Industrials: 77.9%

  • Materials: 20.8%

  • Information Technology:1.4%

Distribution: Annually.

Management cost: 0.69%

Net assets: $76m

NAV: $8.89

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Market Index

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