Now could be an opportune time to run the rule over the Betashares Geared Australian Equity Fund (Hedge Fund) ETF (ASX: GEAR) and SPDR S&P/ASX 50 ETF (ASX: SFY). Using our internal quantitative analysis, these ETFs appear to offer attractive exposure to the Australian shares sector.
Getting to know the SFY and GEAR ETFs
BetaShares GEAR Fund is an internally geared fund, investing in the largest 200 companies on the ASX, by market capitalisation.
The SPDR SFY ETF is the only Australian ETF providing exposure to Australia’s top 50 listed companies, by market capitalisation. SFY provides a low-cost way to invest in the ASX’s top 50 companies through a single fund.
Note: you can continue learning about the SFY ETF on our report page. ASX SFY report.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for July 2021, the GEAR ETF has an MER of 0.80% while the SFY ETF had a yearly fee of 0.29%. So, SFY 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 classify 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.
How we study past performance
Typically, we want to a see ETFs with a three-year track record of attractive performance. Put another way, when an ETF achieves a three year track record, we score it in a better position than might otherwise be the case. That said, there are exceptions to this rule of thumb. Also, remember that it’s hard to compare an ETF with a hedge fund strategy against other ETFs. Why? Hedge fund ETFs often use inverse or ‘opposite’ strategies which means that they’re designed to move in an opposite direction to the market. Nevertheless, we can see that both ETFs met their three-year performance milestone.
Best ETFs Takeaway
In summary, the SFY ETF ranks higher against our internal scoring methodology but not by much compared to GEAR.
Please, keep in mind, there is much more to choosing 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…