Best Australian Share ETPs

Investors who want low-cost, broad exposure to the domestic sharemarket as the core of their portfolio need look no further

Exchange traded products (ETPs) provide a cheap way to capture the local sharemarket and have won over investors for this reason.

At the time of writing, domestic exchange traded funds (ETFs) have taken in $5.4 billion in 2020 compared with $2.5 billion at the same point last year.

Despite the pandemic, domestic ETPs have grown 19% over the year, making up the second biggest slice of the Australian ETP market at about a third.

It’s an all-new podium in our awards, with none of the top three placeholders from 2020 featuring this year.

iShares leads the league with its flagship fund, the iShares Core S&P/ASX 200 ETF.

Christian Obrist, head of iShares, views the ETF as “a core building block for investors who want broad-based exposure to the S&P/ASX 200”.

You would be hard-pressed to find a cheaper, more effective way to buy into the top 200 largest companies on the ASX. This is reflected in the fund’s mandate to track the performance of the S&P/ASX 200 Accumulation Index, before fees. As such, it’s dominated by the financials, materials and healthcare sectors.

Investors in the fund have enjoyed returns of 5.03%pa over three years, with a management fee of only 0.09%.

In second place is the Vanguard Australian Shares Index ETF, which differs slightly from the iShares fund in that it tracks the return of the S&P/ ASX 300 index.

The fund is billed a long-term grower with some tax-effective income, thanks to franking credits. It has returned slightly more than the iShares fund over three years, at 5.20%pa, but has a slightly higher management fee of 0.10%.

Third place goes to State Street’s SPDR S&P/ASX 200 fund. Launched in August 2001, it’s Australia’s oldest ETF. Also tracking the S&P/ASX 200, it has returned slightly less than the iShares fund over three years, with 5% growth, and has a slightly higher management fee of 0.13%.