The Betashares Australian Sustainability Leaders ETF (ASX: FAIR) and SPDR S&P/ASX 200 Listed Property Fund ETF (ASX: SLF) are exchange-traded funds (ETFs) operating in the Australian shares sector, and aiming to make investing as simple as possible.
How the FAIR and SLF ETFs fit in a portfolio
The BetaShares FAIR ETF provides exposure to the largest Australian shares and focuses on companies which operate ethically. FAIR has been certified by the Responsible Investment Association Australasia (RIAA), as part of the Responsible Investment Certification Program.
The SLF ETF by SPDR invests in shares/securities of listed real estate investment trusts (REITs). Investors can use these property-focused ETFs to get exposure to a broad basket of trusts and companies exposed to property, including office spaces, commercial rental spaces and construction projects.
See our ASX SLF report – it’s totally free.
Okay, so we know what they’re designed to do, the sectors and strategies. Now what? One of the quick ways to compare ETFs like SLF and FAIR is to study the fee load. No one likes paying high fees if they don’t need to. Here at Best ETFs and Rask Austalia, we begin by analysing the fees and ‘all in’ costs of an ETF or fund. Our team will score ETFs based on management fees, plus any other costs, then put them into quartiles by sector, strategy and across the entire ETF market.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for December 2020, the FAIR ETF has an MER of 0.49% while the SLF ETF had a yearly fee of 0.40%. So, SLF wins on this metric. Keep in mind, a more useful metric to know is the fee quartiles that these ETFs find themselves in (note: quartile 1 is best). Meaning, we take all the Australian shares ETFs in our database and divide them into 4 quartiles, based on their fees. For example, any ETF which has a fee below 0.3% would be considered in our first (best) quartile.
Performance is important. Keep in mind, performance isn’t everything — and past performance is not indicative of future performance. It’s just one part of a much bigger picture. The reason we say performance is not everything is because of volatility of financial markets and the economy from one year to the next. Some ETFs and funds can put in a good return one year just to generate poor returns the next time around. That’s why we prefer three-year or seven-year track records over one-year track records. It can smooth out the temporary performances caused by external factors. Both ETFs have achieved our three-year performance hurdle. As of December 2020, the FAIR ETF had an average annual return of 9.75%. During the same time, the SLF ETF returned 5.49%.
One final point: the ETF provider is important. In Australia, we believe there are a handful of stand-out ETF providers and many that are mid-pack or very fresh. As you guessed, the provider backing the FAIR ETF is Betashares. And Betashares ranks highly for our scores of ETF providers and issuers in Australia. We believe BetaShares is one of the leading providers of index and non-index style products to retail investors in Australia. SLF’s ETF provider on the ASX is SPDR. SPDR ranks highly for our scores of ETF providers and issuers in Australia. We think SPDR is one of Australia’s top 10 ETF providers for advisers and institutions, and its ETFs on the ASX provide good exposure to particular financial markets for retail investors.
What it all means
In summary, the FAIR ETF rates better for our internal scoring methodology but not by much compared to SLF.
Please, keep in mind, there is much more to picking a good ETF. That’s why you should now use these skills to find the best ETF you can. If you want the name of our team’s top ETF pick for 2021, keep reading…