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ETF performance quarterly review

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To start the year, I’ve provided a quick round up of some of the more popular ETFs available to Australian investors, with a particular focus on secular and thematic opportunities within global equities. 

ETF: iShares Asia 50 ETF (ASX: IAA)

Summary: Largest 50 Asian shares ex Japan

Asian equity markets continued to underperform as global investors flooded back into the US and other developed markets on regulatory concerns. The result was a selloff in the biggest names in the index including Alibaba, Tencent and JD.com. TSMC continued to defy the weakness, delivering strong growth.

With economic policy moving towards expansion, Asia remains a preferred tactical tilt, with this ETF offering exposure to both IT (37 per cent), financials and discretionary retailers, 19 per cent each. Other key holdings including insurer AIA Group, Hong Kong Stock Exchange and Samsung Electronics.

ETF: ETFS Fang+ ETF (ASX: FANG)

Summary: 10 global technology leaders

Despite a difficult final month of the year, in which major technology companies including Alphabet and Meta Platforms were sold off heavily, the FANG+ strategy managed to deliver a strong quarter of returns. Among the key drivers was Apple, which reached a US$3 trillion valuation on continued sales growth.

Tesla remains the largest holding in the fund, with the company rallying after continuing to beat production expectations, while the Chinese holdings of Baidu and Alibaba continued to underperform. The key change during the quarter was the removal of Twitter from the index, replaced by global leader, Microsoft. 

ETF: ETFS Morningstar Global Technology ETF (AX: TECH)

Summary: Global non-FANG technology leaders

While the big-name technology leaders bore the brunt of the interest rate induced sell-off, the unique diversification of this strategy came to the fore. The ETF delivered another strong quarter as a series of lesser-known, but equally important, technology names delivered strong quarterly earnings results.

Among the largest holdings within the strategy are cybersecurity firm Palo Alto Networks, Tyler Technologies and global fintech leader SS&C Technologies. Cloud and security operator F5 was a standout, as was Israeli AI and voice recognition business Nice Systems.

ETF: ETFS S&P500 Yield ETF (ASX: ZYUS)

Summary: US shares paying higher dividends

This ETF was among the top performers in the portfolio once again, as the preference for less volatile companies with solid dividends meant it carried a significant weighting to so-called ‘value’ stocks at a time when the growth end of the market sold off. About 20 per cent of the portfolio is held in utilities and staples.

Among the top holdings and performers were telecommunications players AT&T and Edison, while healthcare company Pfizer continues to perform well as the Omicron outbreak spurs the need for another round of COVID-19 booster shots. Other key holdings include Prudential and Iron Mountain storage.

ETF: iShares S&P Small Cap ETF (ASX: IJR)

Summary: Global companies valued between $600 million and $2.4 billion

Smaller companies continued their strong recent performances, with the prospect of inflation supporting what are generally more economically sensitive business. This is reflected in the sector exposure which includes 18 per cent to financials, 17 per cent to industrials and just 13 per cent to technology stocks.

Among the key drivers of performance have been lesser known, but high quality and growing companies, including healthcare tech company, Omnicell, and wood building product supplier UFP Industries who are seeing growth in their wood alternatives. The ETF trades cheaper than the market, holding 600 stocks.

ETF: iShares Global Healthcare ETF

Summary: Largest global healthcare, biotech companies

The pandemic has provided a generational tailwind to the healthcare sector as the success of COVID-19 treatments saw a flood of capital returning to industry leaders. The sector delivered another strong quarterly performance, with Johnson & Johnson a standout as their COVID-19 treatment sales spiked.

Pfizer continued its strong recent run on the back of the Omicron variant and the need for additional doses, while diagnostics business Danaher has seen a cyclical tailwind turn into a structural change. Care provider United Health has also benefited from a surge in insurance and growing customer visits.

ETF: iShares S&P500 Hedged ETF (ASX: IHVV)

Summary: Large US companies by market cap

The big names continued to dominate, sending the S&P500 to more than 80 record highs during 2021. Such has been the success of the likes of Microsoft, Alphabet, Apple and Amazon that some 25 per cent of the market is now driven by five companies. S&P500 companies delivered record earnings growth in 2021.

The combination of technology (29 per cent) and financials (11) in the form of the major global investment banks has meant the S&P500 has been somewhat shielded from the sell-off in the technology sector to end 2021, with less volatility than the commodity-focused Dow Jones. The fund yields around 1.1 per cent.

ETF: Van Eck US Wide Moat ETF (ASX: MOAT)

Summary: High quality US shares assessed by Morningstar research house

This Morningstar-managed active ETF couldn’t keep up with the surging benchmark after another strong year. Seeking businesses that have strong competitive advantages, or “moats,” the company is significantly more diversified than the technology-heavy index, with 31 per cent in healthcare and industrials.

Among the largest holdings are Berkshire Hathaway (whose underlying portfolio has also struggled to keep up with the market), Microsoft, Dominion Energy, Merck and Corteva. Lesser-known technology plays Aspen and Tyler Technologies delivered significant gains after strong earnings reports.

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