SMSF investment: 20 most popular ETFs

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.