InvestSMART ETF Scorecard: Best and worst performers

Sydney, Australia: 14 October 2024: The best- and worst-performing Australian ETFs have been identified in an analysis by InvestSMART, a leading online investment adviser who specialise in ETF portfolios.  

The inaugural InvestSMART ETF Scorecard report provides a comprehensive ranking of ETFs based on their performance to 31 August 2024 and InvestSMART's 'star rating' system. 

The report also highlights the five best- and worst-performing ETFs across the following six popular categories: Australian shares, global shares, Australian fixed income, high yield, commodities, and ethical ETFs. 

Best- and worst-performing ETFs 

Betashares Geared US Equity Fund Currency Hedged (ASX: GGUS) was the best performing ETF with a 46.6% return over one year. A $1,000 investment in this ETF 12months ago would have grown to $1,466. GGUS provides geared exposure to the S&P 500 by combining investor funds with borrowed capital.  

At the other end of the spectrum, Global X Ultra Short Nasdaq 100 Hedge Fund (SNAS) was the worst performer with a -40.5% return over 12 months. A $1,000 investment one year ago would have resulted in a $405 loss. SNAS is both a short and leveraged product which multiplies the losses when the Nasdaq 100 rises. With the index rising strongly over the period considered, SNAS fell significantly. It received a one-star InvestSMART rating. 

Ron Hodge, CEO of InvestSMART Group said: 

"ETFs have been on a growth rocket ship for the past decade as more everyday investors are won over by low fees and a deepening understanding that broad-based passive index tracking ETFs provide diversification and reduced risk.  

"While this explosion of ETFs has made investing more accessible to investors, it also comes with the overwhelm of product choice. We created this report to help investors with ETF selection and to share our 'star ratings', which is the methodology we use when creating InvestSMART portfolios. 

"InvestSMART's own data shows that 56% of people consider investing in ETFs for wealth creation purposes. With more investors turning to ETFs to diversify their asset allocation, we are seeing the beginning of the shift in how Australians build wealth.   

"In the next decade, ETFs will likely become a cornerstone of wealth-building strategies, especially as skyrocketing property prices push homeownership further out of reach for younger generations. 

"It's crucial for investors to look beyond short-term gains and focus on long-term performance. For instance, six of this year's top 10 best-performing ETFs have scored three stars or below in our 'star rating' system. This year's winner could easily be next year's loser." 

Most and least popular ETFs 

Broad-based Australian ETF continue to be popular with investors with Vanguard Australian Shares Index ETF (ASX: VAS) and Betashares Australia 200 ETF (A200) taking the top two spots on the list of ETFs with the highest flow in funds under management over 12 months. Both receive a five-star rating.  

An interesting trend is the significant inflows into international ETFs, which was the most popular category overall, with investors likely seeking exposure to the booming US tech sector.  

The least popular ETF was the Magellan High Conviction Trust (MHHT). The outflows of $458 million occurred on the back of a good one-year performance, with the ETF returning 16.5%. The 1.5% fee is also particularly high compared to passive index-tracking international ETFs. MHHT received a low InvestSMART star rating of two. 

Best and worst ETFs by category 

The report showed that while many ETFs had a strong year, others struggled. The Australian and international sector ETFs saw solid returns, with even the 'worst' performers gaining 9.4% and 11.0% respectively.  

In contrast, commodity ETFs showed more varied results. Gold-themed ETFs performed exceptionally well, but other themed ETFs such as Global X Physical Palladium (ASX: ETPMPD), once a star performer, recorded a 25.2% fall.  

"Investing in themed or active ETFs can be tempting for the outsized returns they can promise, but they tend to be more volatile than passive ETFs. Investors should limit exposure to these riskier options to a small percentage within their portfolios," said Hodge. 

Five-star rated ETFs 

InvestSMART also ranked ETFs by their InvestSMART star rating (based on: size of the ETF, funds under management, fees, liquidity, spread, tracking error, and outperformance for active ETFs) and then by their five-year performance.  

The top five-star ETF with the best performance over the past five years is the SPDR S&P 500 ETF Trust (SPY) with a return of 15.3%p.a. A $1,000 investment in the ETF five years ago would now be worth $2,040. SPY offers exposure to 500 of the largest US-listed companies.  

Betashares Australian Strong Bear (Hedge Fund) ETF (BBOZ), scored a one-star rating and delivered -22.03%p.a. over five years. With a fee of 1.38% it is also one of the most expensive ETFs available on the ASX. 

"The adage 'it's time in the market, not timing the market', highlights that holding a diversified portfolio of low-fee ETFs for the long term is a strategy that can reduce risk and enhance returns. 

"When you look at ETFs over five years, you can see that most of the highly rated ETFs are broad-based, with ultra-low fees. These ETFs tend to be the best performers when measured over years and decades. 

"Predicting which sectors and companies will excel over the next five years is inherently challenging. However, by maintaining a highly diversified portfolio of ETFs, investors are well-positioned to gain exposure to future high performers, increasing your likelihood of capitalising on emerging opportunities," concluded Hodge.