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This article includes the 20 most popular ETFs invested in by SMSFs as at 30 September 2018. This article uses data supplied by Class, an SMSF administration software company, and is based on a statistical analysis of the 160,000+ SMSFs administered using Class software. We thanks Class for giving SuperGuide access to such valuable data.
If you are also interested in managed funds, see SuperGuide article SMSF investment: 20 most popular managed funds.
ETFs (Exchange-Traded Funds) are a relatively young investment product, born in the 1990s, which have quickly become popular with investors.
The purpose of ETFs is simple, and this simplicity helps deliver results. Each ETF is designed to reflect the performance of a particular market – whether that’s a stock index such as the ASX200 or the S&P500, a region such as Emerging Markets, an industry such as Healthcare, or an asset class such as Global Property. New breeds of ETFs are being developed all the time, and there are now over 150 ETFs available on the ASX.
ETFs can offer investors a simple way to diversify, and because the vast majority of ETFs are passively managed, fees can often be very low. Low fees can benefit overall performance because, as we all must know by now, fees impact returns.
Several superannuation funds now offer the ability for their members to invest in ETFs, but SMSFs have already demonstrated an appetite for ETFs for some time. Class have tracked SMSF investments in ETFs back to June 2011, when just 6.9% of SMSFs held ETFs, representing approximately 0.6% of their assets.
In 7 years the amount of SMSFs investing has more than tripled. As of September 2018, 20.5% of SMSFs hold ETFs.
Across the same period, the percentage of total SMSFs invested in ETFs has more than quadrupled. As of September 2018, ETFs represent approximately 2.7% of total SMSF assets.
Source: Class (class.com.au). Data as at 30 September 2018
Class’ data shows that, on average, the SMSFs that hold ETFs are increasing their investment in them, and over time invest a significant portion of their portfolio in them.
Adam Solomon, Head of Analytics at Class said: “The popularity of ETFs with SMSFs has increased significantly over the last few years, providing investors with an easy and cost-effective means of gaining exposure to international assets, and other harder-to-access asset classes such as emerging markets. We expect to see this growth trend continue with the widening range of ETFs that are becoming available.”
A Class SMSF Benchmark Report in March 2018 found that SMSFs that hold ETFs have on average 3.26 ETFs per SMSF, and ETFs represent on average 10.9% of their overall assets. In June 2011 SMSFs that held SMSFs had on average 2.23 ETFs per SMSF, and ETFs represented 7.93% of their overall assets.
The Class report, which also incorporated findings from a BetaShares/Investment Trends ETF Report, also found that the average SMSF with ETFs has approximately $170,000 invested in ETFs, compared to approximately $70,000 for other ETF investors. At March 2018 SMSFs accounted for over 50% of all investments in ETFs.
Class’ data also demonstrates that ETFs are popular across all phases (Accumulation, Mixed and Retirement phase). Mixed represents SMSFs that are in both accumulation phase and retirement phase.
Mixed phase SMSFs are more likely to use ETFs, and the ones that do have on average approximately $241,000 invested in ETFs. However, since mixed phase SMSFs have a far higher level of average assets, this still equates to a lower percentage of their assets being in ETFs.
Table 1: ETF investment by phase of SMSF
Accumulation | Mixed | Retirement | |
---|---|---|---|
Percentage of assets in ETFs | 3.2% | 2.3% | 3.1% |
Percentage of SMSFs holding ETFs | 18% | 24% | 21% |
Average assets in ETFs where held | $150,000 | $241,000 | $157,000 |
Source: Class (class.com.au). Data as at 30 September 2018
International and Domestic ETFs.
As previously noted, ETFs provide a cost-effective way to get investment exposure to overseas markets. This is reflected in the fact that international ETFs make up more than half (55%) of the 20 most popular ETFs invested in by SMSFs. This has reduced from 61% in March 2016, perhaps reflecting how the Australian domestic ETF market has matured.
Source: Class (class.com.au). Data as at 30 September 2018
20 most popular ETFs invested in by SMSFs
The top 20 list below is ranked by the percentage of SMSFs that hold these ETFs, rather than the value of assets that SMSFs have invested in those ETFs, although both figures are provided in the table.
Table 2: 20 most popular ETFs invested in by SMSFs
Rank | Code | Description | International or Domestic | % of SMSFs with ETFs that hold this Security | % of total SMSF ETF investments* |
---|---|---|---|---|---|
1 | IVV | iShares S&P 500 ETF – Exchange Traded Fund Units Fully Paid | International | 19.0% | 8.7% |
2 | VEU | Vanguard All-World Ex-Us Shares Index ETF – Chess Depositary Interests 1:1 | International | 13.7% | 3.9% |
3 | IOO | iShares Global 100 ETF – Exchange Traded Fund Units Fully Paid | International | 13.3% | 4.0% |
4 | VAP | Vanguard Australian Property Securities Index ETF – Exchange Traded Fund Units Fully Paid | Domestic | 12.7% | 3.4% |
5 | VTS | Vanguard Us Total Market Shares Index ETF – Chess Depositary Interests 1:1 | International | 12.1% | 4.7% |
6 | MGE | Magellan Global Equities Fund (Managed Fund) – Trading Managed Fund Units Fully Paid | International | 12.1% | 4.4% |
7 | STW | SPDR S&P/ASX 200 Fund – Exchange Traded Fund Units Fully Paid | Domestic | 11.1% | 5.9% |
8 | SLF | SPDR S&P/ASX 200 Listed Property Fund – Exchange Traded Fund Units Fully Paid | Domestic | 9.6% | 2.0% |
9 | AAA | Betashares Australian High Interest Cash ETF – Exchange Traded Fund Units Fully Paid | Domestic | 9.3% | 2.9% |
10 | VAS | Vanguard Australian Shares Index ETF – Exchange Traded Fund Units Fully Paid | Domestic | 9.3% | 6.7% |
11 | IEU | iShares Europe ETF – Exchange Traded Fund Units Fully Paid | International | 8.7% | 2.0% |
12 | VHY | Vanguard Australian Shares High Yield ETF – Exchange Traded Fund Units Fully Paid | Domestic | 7.4% | 2.9% |
13 | IEM | iShares MSCI Emerging Markets ETF – Chess Depositary Interests 1:1 Ishmsciem | International | 7.0% | 1.3% |
14 | VGS | Vanguard MSCI Index International Shares ETF – Exchange Traded Fund Units Fully Paid | International | 6.8% | 2.9% |
15 | IAA | iShares Asia 50 ETF – Exchange Traded Fund Units Fully Paid | International | 6.1% | 1.3% |
16 | VAF | Vanguard Australian Fixed Interest Index ETF – Exchange Traded Fund Units Fully Paid | Domestic | 6.0% | 2.1% |
17 | IXJ | iShares Global Healthcare ETF – Exchange Traded Fund Units Fully Paid | International | 5.9% | 1.1% |
18 | DJRE | SPDR Dow Jones Global Real Estate Fund – Exchange Traded Fund Units Fully Paid | International | 5.1% | 0.6% |
19 | MVW | Vaneck Vectors Australian Equal Weight ETF – Exchange Traded Fund Units Fully Paid | Domestic | 4.9% | 1.4% |
20 | SFY | SPDR S&P/ASX 50 Fund – Exchange Traded Fund Units Fully Paid | Domestic | 4.8% | 1.6% |
Source: Class (class.com.au). Data as at 30 September 2018
*Percentage each security makes up of the total SMSF ETF investments e.g. IVV is 8.4% of the total SMSF investments in ETFs.
Perhaps because the ETF market in Australian is still relatively young, the 20 most popular ETFs make up a whopping 64% of all ETF investments by SMSFs. That means only 36% of SMSF assets in ETFs is invested in all other ETFs put together. The top 3 ETFs alone represent 21% of all SMSFs assets invested in ETFs.
The ETF market has become less concentrated in recent years though. As recently as March 2016 the top 20 represented 77% of all SMSF investments in ETFs, and the top 3 represented 28%.
It’s also useful to note that just 6 companies produce the ETFs in the top 20, and 3 companies (Vanguard, iShares and SPDR) produce 17 of the top 20.
The majority of the top 20 ETFs focus on share indexes for particular countries or regions (eg the ASX, S&P500, Europe, Asia, Emerging Markets). The list also includes ETFs for domestic or international asset classes such as Property, Cash and Fixed Interest.