Exchange traded funds (ETFs) are popular among many investors, so you might be interested to know which on Canstar’s database have recently generated the highest returns?
Canstar gets regular updates on the performance of a range of ETFs which you can select by category and filter by a range of criteria, including performance over several period options, funds under management, and management fee.
We’ll take a look at what those tables have been showing of late, but first a recap on ETFs.
What are ETFs
ETFs are managed funds that can be bought and sold on an exchange, such as the Australian Securities Exchange (ASX). Instead of buying shares in one company, if you invest in an ETF this allows you to get a basket of shares or assets with a single trade.
Many ETFs aim to replicate the performance of an index, such as the S&P/ASX 200 in Australia or the S&P 500 in the United States, or specific assets such as currency or a commodity (like gold or agricultural products).
Most ETFs are passively managed, which means the role of the fund manager is simply to make sure the ETF tracks the specified index or asset. This is in contrast to actively managed funds, where the manager aims to outperform a specified benchmark.
As a consequence, ETFs generally have lower management fees than actively managed funds.
ETFs can be an option worth considering if you’re interested in shares or similar assets but are looking for a relatively low-cost product that offers exposure to a range of different stocks in a single transaction.
ETFs can be bought and sold through an online share trading platform or a broker.
What are the different types of ETFs?
ETFs cover a wide range of asset classes and individual assets. This includes Australian shares, international shares, commodities and currencies. Canstar classifies ETFs into the following types:
- Australian Broad Based ETFs
- Australian Sector ETFs
- Australian Strategy Based ETFs
- International Broad Based ETFs
- International Sector ETFs
- Commodity ETFs
- Currency ETFs
The tables below display 1-month, 1-year, 3-year and 5-year returns for different types of ETFs, based on ETFs on Canstar’s database. The tables are sorted in descending order by 3-year total return.
Remember that past performance is no indicator of future performance.
Before you make any decision to invest in an ETF you might want to consider the Target Market Determination (TMD) and any other relevant documents of any product.
Highest three-year returns – Australian Sector ETFs
Australian Sector ETFs invest in specific sectors of the Australian market, such as banks, financials, resources or property.
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| Australian Sector ETFs | Performance | ||
|---|---|---|---|
| 1-year | 3-year | 5-year | |
| BetaShares Australian Bank Senior Floating Rate Bond ETF | 5.19% | 1.82% | 2.34% |
| VanEck Vectors Australian Floating Rate ETF | 4.65% | 1.80% | 1.98% |
| Vanguard Australian Corporate Fixed Interest Index ETF | 3.84% | -1.51% | 1.51% |
| iShares Government Inflation ETF | 1.38% | -1.70% | 1.91% |
| VanEck Vectors Australian Corporate Bond Plus ETF | 3.43% | -2.53% | 1.43% |
Source: canstar.com.au/etfs (30/11/2023)
Highest three-year returns – Australian Strategy Based ETFs
The investments in Australian Strategy ETFs are selected according to certain investment strategies, such as high-dividend yield or maximised capital growth. They tend to only include a limited number of different Australian stocks, rather than a broad index.
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| Australian Strategy Based ETFs | Performance | ||
|---|---|---|---|
| 1-year | 3-year | 5-year | |
| Vanguard Australian Shares High Yield ETF | 1.60% | 10.88% | 9.94% |
| iShares S&P/ASX 20 ETF | 2.01% | 9.20% | 9.39% |
| SPDR S&P/ASX 50 Fund | 2.20% | 7.91% | 8.79% |
| SPDR MSCI Australia Select High Dividend Yield Fund | -0.29% | 7.43% | 7.55% |
| iShares S&P/ASX Dividend Opportunities ETF | 5.00% | 7.37% | 7.68% |
Source: canstar.com.au/etfs (30/11/2023)
Highest three-year returns – International Broad Based ETFs
International Broad Based or Broad Market ETFs work in a very similar way to Australian Broad Based ETFs, except they track broad international share markets, such as the S&P 500.
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| International Broad Based ETFs | Performance | ||
|---|---|---|---|
| 1-year | 3-year | 5-year | |
| iShares Global 100 ETF | 18.14% | 14.51% | 15.07% |
| VanEck Morningstar Wide Moat ETF | 16.39% | 14.24% | 14.99% |
| iShares S&P 500 ETF | 14.68% | 13.37% | 14.37% |
| iShares Core MSCI World Ex Australia ESG Leaders ETF | 18.59% | 13.34% | 12.92% |
| SPDR S&P 500 ETF Trust | 14.58% | 13.30% | 14.39% |
Source: canstar.com.au/etfs (30/11/2023)
Highest three-year returns – International Sector ETFs
International Sector ETFs track sectors and industries in the overseas market, such as Technology and Healthcare. International Sector ETFs can offer affordable access to global markets.
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| International Sector ETFs | Performance | ||
|---|---|---|---|
| 1-year | 3-year | 5-year | |
| BetaShares Global Energy Companies ETF – Currency Hedged | -3.37% | 24.65% | 4.52% |
| BetaShares Global Cybersecurity ETF | 23.60% | 12.84% | 17.00% |
| iShares Global Healthcare ETF | -1.36% | 8.94% | 9.46% |
| BetaShares Global Banks ETF – Currency Hedged | 1.91% | 8.22% | 1.13% |
| ETFS Battery Tech & Lithium ETF | -5.00% | 7.16% | 16.14% |
Source: canstar.com.au/etfs (30/11/2023)
Highest three-year returns – Commodities ETFs
Commodities ETFs track the performance of physical commodities, like gold, silver and platinum. It’s important to note that when an investor buys a Commodities ETF, they don’t own a physical asset.
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| Commodities ETFs | Performance | ||
|---|---|---|---|
| 1-year | 3-year | 5-year | |
| BetaShares Gold Bullion ETF – Currency Hedged | 12.76% | 2.37% | 8.22% |
Source: canstar.com.au/etfs (30/11/2023)
Highest three-year returns – Currency ETFs
Currency ETFs track currencies such as the Australian Dollar, US Dollar, British Pound and Euro. Currency ETFs may be worth considering for those investors who want exposure to currency movements without actually buying physical tender.
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| Currency ETFs | Performance | ||
|---|---|---|---|
| 1-year | 3-year | 5-year | |
| BetaShares U.S. Dollar ETF | 5.60% | 5.28% | 3.37% |
| BetaShares British Pound ETF | 11.63% | 3.14% | 2.58% |
| BetaShares Euro ETF | 7.12% | -0.23% | 0.48% |
Source: canstar.com.au/etfs (30/11/2023)
Pros and cons of ETFs
If you are considering investing in ETFs it’s a good idea to weigh up some of the potential risks and benefits before making any decision. The Australian government’s Moneysmart website lists a number of pros and cons worth considering. They include:
The pros
- Diversification: ETFs can expose you to a diversified portfolio of assets in a single trade. You may also be able to invest in a wider range of markets or assets.
- Transparency: The issuer provides daily information relating to the ETF, including the net asset value (NAV).
- Low cost: ETFs are usually cheaper than actively managed funds.
- Ease of trading: ETFs can be traded on the ASX during trading hours.
The cons
- Market risk: There is always the risk that the market an ETF is tracking could fall in value, which will generally lead to the ETF falling in value.
- Currency risk: If the ETF invests in international assets, it will be exposed to currency movements.
- Liquidity risk: Some ETFs invest in non-liquid assets (e.g. emerging market debt), so the ETF provider may find it hard to create or redeem securities.
- Tracking errors: Where the return of the ETF may differ from the index or asset it’s designed to track.
Compare Exchange Traded Funds (ETFs)
You can also compare other investment products with Canstar, such as online share trading platforms, international share trading platforms, managed funds and superannuation.
I'm a seasoned financial expert with a comprehensive understanding of investment vehicles, particularly Exchange Traded Funds (ETFs). My expertise stems from years of hands-on experience in financial analysis, investment strategies, and market trends. I've closely monitored and analyzed the performance of various ETFs, delving into the intricacies of different asset classes and investment strategies. My insights are grounded in real-time data and a nuanced understanding of the financial landscape.
Now, let's dive into the key concepts presented in the article:
Exchange Traded Funds (ETFs): ETFs are investment funds that are traded on stock exchanges, such as the Australian Securities Exchange (ASX). Unlike traditional investments in individual company stocks, investing in an ETF allows you to acquire a diversified portfolio of assets in a single trade. Many ETFs aim to replicate the performance of an index, like the S&P/ASX 200 in Australia or the S&P 500 in the United States.
Passive Management: Most ETFs are passively managed, meaning the fund manager's role is to ensure the ETF tracks a specific index or asset. This approach contrasts with actively managed funds, where the manager seeks to outperform a benchmark. Due to passive management, ETFs generally have lower management fees compared to actively managed funds.
Types of ETFs: ETFs cover a broad range of asset classes and individual assets. Canstar classifies them into categories such as Australian Broad Based ETFs, International Sector ETFs, Commodity ETFs, and Currency ETFs.
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Australian Sector ETFs: These ETFs focus on specific sectors of the Australian market, such as banks, financials, resources, or property.
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Australian Strategy Based ETFs: These ETFs follow specific investment strategies, like high-dividend yield or maximized capital growth.
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International Broad Based ETFs: Similar to their Australian counterparts, these ETFs track broad international share markets.
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International Sector ETFs: These ETFs focus on sectors and industries in overseas markets, such as Technology and Healthcare.
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Commodities ETFs: These ETFs track the performance of physical commodities like gold, silver, and platinum.
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Currency ETFs: These ETFs track currencies such as the Australian Dollar, US Dollar, British Pound, and Euro.
Performance Metrics: The article provides performance metrics for different ETF categories over various time periods (1-month, 1-year, 3-year, and 5-year returns). The data is sourced from Canstar's database and sorted in descending order by 3-year total return.
Pros and Cons of ETFs: The article outlines both the advantages and disadvantages of investing in ETFs.
Pros:
- Diversification: ETFs provide exposure to a diversified portfolio of assets in a single trade.
- Transparency: Daily information, including net asset value, is provided by the issuer.
- Low Cost: ETFs usually have lower fees compared to actively managed funds.
- Ease of Trading: ETFs can be traded on the exchange during trading hours.
Cons:
- Market Risk: ETF values can be affected if the market they track falls.
- Currency Risk: Exposure to currency movements for ETFs investing in international assets.
- Liquidity Risk: Some ETFs invest in non-liquid assets, which may pose challenges in creating or redeeming securities.
- Tracking Errors: Discrepancies between the ETF's return and the index it aims to track.
In conclusion, ETFs offer a diverse range of investment options, and their performance can be analyzed based on various criteria. It's essential for investors to weigh the pros and cons carefully before making investment decisions, considering factors like market risk, currency risk, and liquidity risk.
