2 quality ASX ETFs – QLTY and QUAL

‘Quality’ ETFs use metrics such as return on equity (ROE) and earnings stability to identify high-potential companies and generate above-market returns.

The BetaShares Global Quality Leaders ETF (ASX: QLTY) and VanEck Vectors MSCI World ex-Australia Quality ETF (ASX: QUAL) are two ETFs trying to do just that.

QLTY ETF

The BetaShares Global Quality Leaders ETF (ASX: QLTY) invests in a portfolio of 150 companies identified as quality leaders due to their return on equity (ROE), debt-to-capital ratio, cash flow generation ability, and earnings stability. Basically, QLTY tries to identify companies with a strong financial position and high earnings growth potential.

QLTY is a relatively new ETF, listed in November 2018, but it is quickly gaining popularity and scale. The ETF currently has over $100 million in funds under management (FUM) and is the most viewed ETF on the BetaShares website. Around 65% of the companies in the QLTY ETF are US-listed, but investors also get exposure to Japan, Switzerland, France, and Denmark, among other countries.

The ETF is heavily skewed towards information technology, which makes up around one-third of the portfolio, and another quarter is invested in healthcare shares. This lean towards tech and healthcare has been profitable, with the QLTY ETF returning nearly 20% per year since listing (although it’s too short of a track record to really judge past returns).

QLTY charges a management fee of 0.35% per year, and you can read more about the ETF in our free report.

QUAL ETF

The VanEck Vectors MSCI World ex-Australia Quality ETF (ASX: QUAL) is VanEck’s version of a global quality ETF, identifying companies with high ROE, stable year-on-year earnings growth, and low financial leverage. QUAL has double the holdings of QLTY, investing in just under 300 companies.

QUAL is a longer-running ETF than QLTY, having listed in 2014. It has also been a very popular ETF, amassing more than $1.5 billion in FUM. QUAL is slightly more skewed towards the US than QLTY, with 70% of FUM invested in US-listed companies, but it also provides exposure to a long list of European economies.

Much like its competitor, QUAL is heavily concentrated in information technology and healthcare companies, which is a big contributor to its returns of 16.5% per year over the last six years. To give an idea of how the ‘quality’ factors affect returns, the MSCI World ex-Australia Quality Index has returned 14% per year over the last five years while the MSCI World ex-Australia Index has returned 10.5% per year.

QUAL charges a slightly higher management fee of 0.4% per year but it has a lower spread than QLTY, meaning the cost to buy and sell shares is lower. For that higher management fee you also get a longer track record, so QUAL should not be excluded from consideration for its higher fees.

You can read our full report on QUAL here.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

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From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

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At the time of publishing, Max does not have a financial or commercial interest in any of the companies or ETFs mentioned.

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The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

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