Exchange traded funds (ETFs) have become an easy and popular way for investors to gain exposure to a basket of shares, commodities, or bonds, through the purchase of one security, the ASX-listed ETF, through a stockbroker, in exactly the same way you would buy and sell shares. The aim of an ETF is to closely track the performance of an index or asset class and provide the returns of that index or asset class – less any fees. There are currently more than 200 ETFs listed on the ASX with more added every month. Here are the six best performing ASX ETFs in 2020, as measured by 1-year return:
|Ticker||TYPE||ETF Name||1 year return|
|MNRS||Global equity||BetaShares Glbl Gold Miners ETF-Ccy Hdg||58.94%|
|ASIA||Asia equity||BetaShares Asia Technology Tigers ETF||47.36%|
|GDX||Global equity||VanEck Vectors Gold Miners ETF||46.57%|
|CNEW||Asia equity||VanEck Vectors China New Economy ETF||39.14%|
|NDQ||Global equity||BetaShares NASDAQ 100 ETF||35.46%|
|USG-NZ||Global equity||Smartshares US Large Growth||29.26%|
Despite the incredible volatility, many ETFs delivered strong returns. But those that performed the best will come as no surprise to readers; anything with technology or gold led the pack.
Topping the rankings list this year was Betashares Global Gold Miners (ASX: MNRS) which closed the year up 58.94% on the back of a surge in the gold price, which hit a seven-year high, at US$1,800 an ounce. This ETF provides simple, cost-effective and transparent exposure to the largest gold miners in the world. The ETF is weighted by market capitalisation, with global leaders Barrick and Newmont the highest allocations, but excludes all Australia-based miners to provide a ‘pure’ global exposure. Below are the top five holdings in the ETF. As you can see each miner has managed a 1-year return of around +30%, benefiting from investors flocking to the precious metal amid an incredible spike in sharemarket volatility and the realisation that interest rates are likely to remain near zero for the foreseeable future.
|Company||Weighting||1 Year Return|
|Barrick Gold Corp||8.40%||30.33%|
|Newmont Mining Corp||7.90%||67.02%|
|Wheaton Precious Metal Group||7.60%||88.53%|
|Agnico Eagle Mines||7.20%||29.47%|
An ETF very similar to MNRS, the Gold ETF VanEck Vectors Gold Miners (ASX:GDX), took third place; this security replicates the NYSE Arca Gold Miners Index. It managed a 46.57% return, the difference driven solely by its higher concentration in the majors and the unhedged nature of the product. GDX provides an exposure to the same suite of companies as MNRS, but with currency fluctuations also included. This means when the A$ falls, the gold price increases and vice versa. For most of the last 12 months the A$ has been falling, benefiting domestic gold producers, only to reverse post-March, explaining the 12% lower return.
|Barrick Gold Corp||13.21%|
|Wheaton Precious Metals Corp||5.45%|
|Newcrest Mining Ltd||4.98%|
In second place was BetaShares’ Asia Technology Tigers (ASX:ASIA) fund, which tracks the top 50 tech companies in Asia (excluding Japan). Stocks such as Alibaba Group (HKG:9988) and Tencent Holdings Ltd (HKG:0700) need no introduction; they are at the beginning of their journey to global domination. They’ve performed extraordinarily well this year, as, with its younger, tech-savvy population, Asia is fast surpassing the West in terms of technological adoption. The Chinese sharemarket remains under-represented in traditional benchmark indices like the MSCI based on its size, so expect capital flows to increase. This sector remains one of the fastest growth sectors. Here are the top five holdings in the ETF:
|Taiwan Semiconductor Manufacturing||9.90%|
|Tencent Holdings Ltd||9.40%|
|Alibaba Group Holding Ltd||8.80%|
|Samsung Electronics Co Ltd||7.90%|
Fourth place was another ETF covering stocks in China, VanEck’s China ETF (ASX:CNEW) returning 39.14%. It tracks the performance of companies in China that give the best growth prospects in sectors making up ‘the New Economy’, meaning sectors such as technology, health care, consumer staples and consumer discretionary. There are no household names for Australian investors in this portfolio, but the underlying holdings are ubiquitous with the expanding Chinese middle class.
|Guangdong Biolight Meditech Co Ltd||1.29%|
|Jiangsu Zitian Media Technology Co Ltd||1.18%|
|Jiugui Liquor Co Ltd||1.08%|
|G-Bits Network Technology Xiamen Co Ltd||1.06%|
|Tibet Rhodiola Pharmaceutical Holding C||1.05%|
Fifth and Sixth place were two US Global ETFs: BetaShares NASDAQ 100 ETF, which returned 35.46% and the Smartshares US Large Growth, a NZ-domiciled strategy, which returned 29.26. Both were powered by the incredible strength of technology stocks, both during the March correction and well before it even began. An important takeaway for investors in this case is that technology companies have become so dominant that they now represent the largest weightings not only in their own indices, but also in broader market indices like the S&P 500 and MSCI. So it’s important to understand what you really own.
|Vanguard Growth ETF|
|Facebook, Inc. Class A||3.65%|
|Alphabet Inc. Class A||2.84%|
|BetaShares NASDAQ 100 ETF|
So, there you have it. Despite COVID-19 and the panicked sell-off that ensued, the above mentioned ETFs were able to post stellar returns. Most impressive were the Gold Miner ETFs, which topped the rankings as investors turned to gold as a safe haven during volatile times, as they have done many times before.