ASX ETFs Vs. LICs
Is UBA The Best Ethical ETF?
UBS Australia’s Ethical ETF (UBA) started in February 2015, making it one of the more established ethical ETFs. It holds shares in !70 companies at any given point and aims to track the performance of the MSCI Australia ex Tobacco ex Controversial Weapons Index.
The UBA ETF has just over $185 million of money invested in it (meaning that’s the market capitalisation). While this pales in comparison to the size of competitors such as the BetaShares Australian Sustainability Leaders ETF (ASX: FAIR), it offers lower management fees and much higher dividends.
The UBA ETF uses a negative screening approach to avoid companies involved in the tobacco or weapons industries, but apart from that, it invests in some of the largest companies on the ASX. This Rask Media article explains negative screening in more detail.
In the past three years, the UBA ETF has returned an average of 11.83% annually, although much of this performance comes from dividends rather than capital growth. UBA’s current trailing dividend yield is 5.44%, 66.45% franked.
UBA Fees & Risks
UBA’s fees are lower than most other ethical ETFs with an annual management fee of only 0.17% per year.
Capital growth has not been a strength of the UBA ETF so it might be best considered as a dividend ETF.
Another point is that some investors may not consider this a true ethical ETF. Depending on your approach, you may be looking for an ETF that actively seeks out ethical companies that are operating in areas such as renewable energy. While this may not be considered a risk, it’s important to note that the UBA ETF doesn’t take a noticeably proactive approach to ethical investing.
UBA ETF – My Take
The UBA ETF is one of the more appealing ethical ETFs in terms of dividend yield and management fees, but it lacks capital growth. Personally, if I was going to invest in an ethical ETF, I would also prefer one that actively seeks ethical companies rather than just excluding companies in a select industry. You can read more about the Betashares FAIR ETF by clicking here, or Betashares ETHI (ASX: ETHI) by clicking here.
For our number one ETF pick, check out the free report below.
Disclosure: At the time of writing, Max does not have a financial interest in any of the companies mentioned.