SMSF investment: 20 most popular ETFs

This article includes the 20 most popular ETFs invested in by SMSFs as at 30 June 2019. 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.

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ETFs (Exchange-traded funds) are a relatively young investment product, born in the 1990s, which have quickly become popular with investors. As the name suggests, ETFs can be bought and sold on the ASX like ordinary shares but offer the diversification of managed funds.

Each ETF is designed to reflect the performance of a particular market – whether that’s a share index such as the ASX200 or the S&P500, a grouping of national markets 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 170 ETFs available on the ASX.

SMSF investors have embraced ETFs because they offer a simple, easy to trade, low-cost way to diversify, especially when it comes to global markets. Because most ETFs are passively managed – tracking an entire index rather than picking winners – fees are generally low. And as we all know by now, low fees can boost returns.

Some large superannuation funds now offer the ability for members to invest in ETFs, but SMSFs have shown a growing appetite for ETFs. Class data shows that, on average, SMSFs that hold ETFs are increasing the number and value of ETFs in their portfolio.

Class has tracked SMSF investments in ETFs back to June 2011, when just 6.9% of funds held ETFs representing around 0.6% of total SMSF assets. 8 years on, as at 30 June 2019 22.2% of funds held ETFs representing 3.1% of SMSF assets.

Source: Class (class.com.au). Data as at 30 June 2019

International and Domestic ETFs.

As previously mentioned, ETFs provide a cost-effective way to gain exposure to overseas markets, especially developed market shares. This is reflected in the fact that international ETFs make up 59% of the 20 most popular ETFs invested in by SMSFs.

The percentage of international ETFs has crept up slightly in 2019 as global sharemarkets recovered from their fourth quarter 2018 slump.

Source: Class (class.com.au). Data as at 30 June 2019

20 most popular ETFs invested in by SMSFs

The top 20 list below is ranked by the percentage of SMSFs holding these ETFs, rather than the percentage each security makes up of total SMSF investments, although both figures are provided in the table.

20 most popular ETFs invested in by SMSFs

Rank	Security Code	Description	Type*	International or Domestic	% of Funds with ETFs that hold this Security	% of total SMSF ETF Investments**
1	IVV	Ishares S&P 500 ETF	E	International	18.1%	7.4%
2	VAP	Vanguard Australian Property Securities Index ETF	E	Domestic	12.5%	3.5%
3	IOO	Ishares Global 100 ETF	E	International	12.4%	4.3%
4	VEU	Vanguard All-World Ex-Us Shares Index ETF	C	International	12.3%	3.5%
5	MGE	Magellan Global Equities Fund (Managed Fund)	T	International	12.3%	4.5%
6	VTS	Vanguard Us Total Market Shares Index ETF	C	International	10.6%	4.0%
7	VAS	Vanguard Australian Shares Index ETF	E	Domestic	10.1%	6.9%
8	STW	SPDR S&P/ASX 200 Fund	E	Domestic	10.1%	5.3%
9	SLF	SPDR S&P/ASX 200 Listed Property Fund	E	Domestic	8.8%	1.7%
10	AAA	Betashares Australian High Interest Cash ETF	E	Domestic	8.1%	2.2%
11	IEU	Ishares Europe ETF	E	International	7.8%	1.6%
12	VGS	Vanguard MSCI Index International Shares ETF	E	International	7.7%	3.0%
13	VAF	Vanguard Australian Fixed Interest Index ETF	E	Domestic	7.0%	2.3%
14	IEM	Ishares MSCI Emerging Markets ETF	E	International	6.6%	1.1%
15	VHY	Vanguard Australian Shares High Yield ETF	E	Domestic	6.5%	2.4%
16	DJRE	SPDR Dow Jones Global Real Estate Fund	E	International	5.9%	0.6%
17	IXJ	Ishares Global Healthcare ETF	E	International	5.5%	1.2%
18	IAA	Ishares Asia 50 ETF	E	International	5.5%	1.1%
19	NDQ	Betashares Nasdaq 100 ETF	E	International	5.2%	1.1%
20	QUAL	VanEck Vectors MSCI World ex Australia Quality ETF	E	International	5.1%	1.3%

Source: Class (class.com.au). Data as at 30 June 2019

*E = Exchange Traded Fund Units Fully Paid, C = Chess Depositary Interests 1:1, T = Trading Managed Fund Units Fully Paid

**Percentage each security makes up of the total SMSF ETF investments e.g. IVV is 7.4% of the total SMSF investments in ETFs.

Perhaps because the ETF market in Australia is still relatively young, the 20 most popular ETFs make up a whopping 59.2% of all ETF investments by SMSFs. However, this figure is falling – down from 64% six months earlier and 77% as recently as three years ago – as the number and range of ETFs grows.

One of the fastest growing ETF categories over the past 12 months has been fixed interest, which helps plug a gap in many SMSF portfolios. ETFs can also help individual investors tap into commodity markets such as oil. There is also growing interest in technology ETFs to tap into the potential of some of the world’s biggest companies such as Apple and Google and innovative industries such as AI and robotics.

It’s worth noting that just 6 companies provide the ETFs in the top 20, and four companies (Vanguard, iShares, SPDR and BetaShares) have 18 of the top 20.

All but 5 of the top 20 ETFs focus on share indices for individual countries (eg the US S&P500 and Australian ASX200), sectors (eg global healthcare and technology via the Nasdaq 100), regions (eg Asia, Europe and emerging markets) or the world (eg global equities). The list also includes ETFs for domestic and international asset classes such as property, cash and fixed interest.