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2022 Stockspot ETF Report
Contents
Welcome 3
The Future of Investing 4
INSIGHTS
01 Australians made nearly $10 billion profit in ETFs over the past year 6
02 ETFs: The investment industry’s best-kept secret 9
03 Savvy investors are shunning high fees 13
04 Picking short-term winners is hard. Focus on good long-term ETFs 16
05 Following trendy ETFs cost investors more than $100 million 20
06 ETFs have helped regular Australian investors outperform expert fund managers 23
About Stockspot 26
2022 ETF REPORT | 2
Welcome
Welcome to the eighth edition of the Stockspot ETF ETFs have also been a trusted investment structure to
Report. handle market volatility, like during COVID-19 and the
Russia/Ukraine war. While some active fund managers
In this report we present our findings after analysing had to freeze investors from being able to redeem
the Australian exchange traded funds (ETF) market. We their money, ETFs continued to trade and act as highly
looked at factors like fees, performance, size and activity. transparent and liquid investment vehicles.
We researched the best-performing ETFs, why investing
in newly launched thematic ETFs might not be such a We have been continuing to advocate for more investors
good idea, and how investing in simple low-cost ETFs to harness the power of ETFs in their portfolios. ETFs
ensures you keep more money in your back pocket. offer a wide variety of benefits, including instant
diversification, low costs, liquidity, transparency, tax
ETFs have been one of the best tools for building wealth efficiency, and ease of access.
for Australian investors and are continuing to gain broad
adoption. The Australian ETF market grew 32% over the We hope you find our analysis useful, and we look
last 12 months, from $102.1 billion to $135.7 billion. The forward to your feedback.
ETF market has quintupled in size over the last five years,
growing at a rate of 38% per year. ETFs are growing at a
faster rate in Australia than in other regions like the U.S.
and Europe.
The past 12 months saw 35 new ETF products launched
and 2 ETFs closed down, giving us a total of 266 ETFs
Chris Brycki Marc Jocum
on both the ASX and Cboe Australia as of March 2022.
Founder and CEO Senior Manager – Investment
and Business Initiatives
Over the last year, broad indexed ETFs continued to take
in the most amount of investor money and outperformed
most active fund managers and listed investment
companies (LICs) in Australia. Our research has found
that investing in a simple ETF could make you 47% more
money over five years than by investing in some of
Australia’s largest and most popular managed funds. ETF
investors in Australia have made a whopping $10 billion
in returns by investing in ETFs over the past year.
2022 ETF REPORT | 3
The Future of Investing
WHAT’S HAPPENING IN THE MARKET? WHAT WE SEE AT STOCKSPOT
ETFs are growing More people are
automating their
+32%
$ ETF investing
$
600
$
Stockspot funds under
The Australian ETF market 450
management ($m)
grew 32% over the last year,
now worth over $135 billion 300
in funds under management.
150
Australian ETF Asset Growth 0
Funds under management ($b)
160 2014 2018 2022
80
+57%
The number of Stockspot clients investing
in ETFs has grown by more than 57%.
0 0
2014 2018 2022
Traditional managed funds and LIC
investors are moving to ETFs
The ETF market continues to grow at a faster rate than
LICs and managed funds, with ETFs growing at 38% p.a.
over the last five years, 3x the rate of LICs and 8x the
rate of managed funds.
MANAGED FUNDS
ETFs
51%
Growth of
experienced
investors
The number of experienced investors
+38%
(with 10+ years’ investing experience)
using Stockspot has grown by 51%
over the past year.
2022 ETF REPORT | 4
The Future of Investing
WHAT’S HAPPENING IN THE MARKET? WHAT WE SEE AT STOCKSPOT
The less you pay, the more you earn Say no to high-fee
Active ETFs keep a greater share of gross returns than fund managers
low-cost ETF providers. Since 2014, Stockspot has
helped clients save more $
$
100% than $25 million in fees.
Vanguard
SPDR
Magellan
Montgomery
% of gross returns
distributed
+$25m
50%
40
%
0%
Money made by investors
Money paid to ETF issuer
Boring is brilliant
Index ETFs have distributed most of the profit made to
Over the last five years, the
investors, whereas active ETFs keep most of the profit for
best-performing ETFs have been
the fund manager.
simple ETFs holding precious metals
Vanguard and SPDR kept ~2% of the ETF profit over the last or those tracking broad indexes.
year, while active fund managers like Magellan and
Montgomery can keep as much as 40% of the returns.
Don’t follow the hype
More than $100 million lost
following the latest trendy ETFs.
WOW
-$100m Stockspot portfolios have
+99%
outperformed 99% of
Everyday Australian average fund managers
investors outperform
expert fund managers Stockspot Average fund
manager
5-year returns (% p.a.)
You would have been 47% 10%
better off over the last five years
investing in the simple index
ETF instead of paying one of
Australia’s largest active fund
managers. 0%
Growth Balanced Moderate
2022 ETF REPORT | 5
01
Australians made nearly $10 billion
profit in ETFs over the past year
The Australian ETF market grew 32% over the last grown four times faster than the broader Australian
year, now worth more than $135 billion in funds under wealth management market (7% p.a.)1 showing that ETFs
management (FUM). This compares to just $17.8 billion are capturing a growing share of investable assets in
when Stockspot released its first ETF Report in 2015. Australia.
Australian investors have been the biggest beneficiary Over the past year, Stockspot has seen a rise in
of the ETF industry growth, pocketing nearly $10 billion Australians using ETFs as:
of capital returns and distributions from ETFs over the • The number of Stockspot clients investing in ETFs
past year. has grown by more than 57%.
• Kids’ accounts have grown by 45% as parents and
During the past five years, Australian ETFs have
grandparents are increasingly looking for ways to
grown 38% per year. This is faster than the U.S. (24%
invest for their children/grandchildren rather than
p.a.) and Europe (23% p.a.) as Australians embrace
keeping money in a low interest savings account.
the benefits of low-cost passive investing. ETFs have
Source: Stockspot, ASX, Cboe using March data
1
ETFGI, Australian Bureau of Statistics (ABS) as of December 2021.
2022 ETF REPORT | 6
01
• More women are investing. Accounts started
by women have grown by 54%. Today, 43% of
Stockspot’s clients are women.
• The number of first-time investors has grown by 50%.
The Vanguard Australian Shares Index ETF (VAS) and
iShares S&P 500 ETF (IVV), which are both in the
Stockspot Portfolios, were the two ETFs that made
investors the most amount of money ($1.4 billion and
$800 million).
ETFs are continuing to grow in popularity due to their
ease to access, low cost, diversification and tax efficiency.
We’re thrilled that ETFs have enabled our clients to
achieve eight consecutive years of positive returns.
Stockspot’s diversified ETF portfolios have returned 2.4%
to 9.3% over the last year after fees with significantly less
risk when compared to buying shares directly. Meanwhile
many Australians have seen returns of less than 1% on
their money sitting in a bank account or term deposit.
2022 ETF REPORT | 7
Client story
“When our first son was born we decided to
open an investment account to start saving and
contribute to his future – think 21st birthday,
university, wedding or even a contribution to
a house deposit.”
SIMON BARBER
STOCKSPOT CLIENT SINCE 2017
Read more
2022 ETF REPORT | 8
02
ETFs: The investment industry’s best-
kept secret
Since 2015, Stockspot has sought to highlight the ETFs replacing their traditional active managed funds
benefits of ETFs by publishing this annual report. At and LICs due to erratic performance and high fees.
the same time, many investment industry professionals Australian investors bought $23 billion of ETFs in the
have derided ETFs and index investing. These critics, past year, the highest yearly flow on record.
including active fund managers and traditional financial
advisers, argue that ETFs aren’t the best choice for The investment industry is consistently seeing money
investors. This couldn’t be further from the truth. As flow out of actively managed funds and pouring into
the ETF ‘secret’ is becoming more obvious each year, index funds and ETFs.
fewer and fewer active funds are able to outperform a
simple index fund consistently over the long run. However, ETFs still only make up around 4% of the total
funds market in Australia. Compared to 25% in the U.S.,
ETFs are becoming the most popular way for we believe there’s a lot further to go in the Australian
Australians to invest. Many investors are turning to ETF market.
Source: Stockspot, ASX, Cboe using March data (excluding active ETF conversions).
2022 ETF REPORT | 9
02
Source: Investment Company Institute (ICI) 2021.
The ETF market continues to grow at a faster rate than
other investment products, growing at three times the
rate of LICs and eight times the rate of managed funds.
ETFs are not just for beginner investors. Many
professionals are also using ETFs in their portfolios due
to their simplicity, ease of use and better performance.
The number of experienced investors (with more than 10
years’ investing experience) using Stockspot has grown
by 51% over the past year.
2022 ETF REPORT | 1002
Source: Stockspot, ICI.
Source: Stockspot, ASX, ICI as of December 2021.
2022 ETF REPORT | 11Client story
“We lost a bundle in the global financial crisis in a not so
good superannuation fund and decided to start a SMSF
(self-managed superannuation fund) to control our
investments.
Originally, property investments were the main
contributor to our money, which we’ve since spread
to the sharemarket, ETFs and including the SMSF to
ensure our investments were in our name.”
BOB AND VICKI MCELVENEY
STOCKSPOT CLIENTS SINCE 2017
Read more
2022 ETF REPORT | 1203
Savvy investors are shunning
high fees
Most investor money is still going into low-cost ETF expensive ETFs produced a negative return over the
products with close to half of the ETF flows going into last five years, compared to the low-cost ETFs which
ETFs charging under 0.25% per year. Overall, 80% of have performed the best, producing a return of over
fund flows went into ETFs charging less than 0.50% 10% p.a. Fees are like termites eating into your returns.
per year. Some ETFs charging higher fees of at least We believe it’s crucial to keep costs low to ensure more
0.50% per year experienced outflows over the past 12 of your returns are kept by you rather than your fund
months. manager.
Investors are attracted to lower costs and better Over the last 12 months, these ETF issuers banked more
returns. Expensive ETFs often relate to active than $550 million in fee revenue.
fund managers or complex underlying strategies
that include leverage, synthetic instruments, and Index ETFs have distributed most of the gross returns
inverse products. These come with higher risks and made to investors, whereas active ETFs keep more
paradoxically, inferior returns. The median return of of their gross returns as fees. For example, Vanguard
Source: Stockspot, ASX, Cboe using March data.
2022 ETF REPORT | 1303
M E D IAN 5-YE AR
and SPDR fees reflect approximately 2-3% of the ETF
E T F F E E TIER NUMBE R OF
E T FS RE T URNS (P.A.) gross returns over the last year. Active fund managers
like Magellan, K2 Asset Management, and Montgomery
Less than 0.25% 47 10.2%
Investment Management can keep as much as 40%
0.25% to 0.49% 95 8.7% of the gross returns. This is one reason why we don’t
recommend active funds to our clients.
0.50% to 0.74% 65 7.2%
Active fund managers will often rise in popularity
0.75% to 0.99% 32 7.3%
due to a period of good performance and a talented
1% and over 27 -4.6% marketing and distribution team. However, the odds are
stacked against active managers delivering consistent
Source: ASX, Cboe as of March 2022.
outperformance. Approximately 90% of active ETFs
underperformed a traditional index ETF over the past
year.
Source: Stockspot.
2022 ETF REPORT | 14Client story
“I suffered from bad advice and there were these
massive losses in the funds I was in and the financial
planner and fund managers still got their commissions!
I’d been paying huge fees. I decided to switch and
move my money into a SMSF with Stockspot instead.
My portfolio would well and truly be worth much more
had I done what I’m doing now at 30 instead of 44.”
JOSH LORETAN
STOCKSPOT CLIENT SINCE 2017
Read more
2022 ETF REPORT | 1504
Picking short-term winners is hard.
Focus on good long-term ETFs
Every year the top and bottom performing ETFs change. The worst-performing ETFs have been ones that have
This highlights the cyclical and inconsistent nature of complicated product structures or invest in riskier
chasing ETFs with high annual returns. For example, underlying assets. The Betashares Crude Oil Index
in our 2021 ETF Report both the BetaShares S&P/ASX ETF-Currency Hedged (Synthetic) (OOO) ETF was the
Australian Technology ETF (ATEC) and ETFS FANG+ best-performing over the past year (up almost 80%), but
ETF (FANG) were the third and fourth best-performing has seen its price fall nearly 50% over the last 5 years
ETFs. In 2022 they were some of the worst-performing despite the price of oil rising over 100% in the same
ETFs and delivered negative returns. On the other period. This huge divergence in performance highlights
hand, some of this year’s top performers have suffered the dangers of investing in synthetic ETFs that must roll
poor performance over the past five years. futures contracts monthly. Investors who were expecting
to see returns similar to the underlying price of oil have
Investors are better off looking at the performance had a rude surprise. Over the last two years the ETF was
of ETFs over multiple years to gauge a better forced to change its index methodology to survive. It
understanding of returns, particularly if the holding has been unable to recover from its price collapse that
period is longer than 12 months. Over the last five occurred in early 2020.
years, the best-performing ETFs have been simple
ETFs holding precious metals or those tracking broad We believe there are many factors you should consider
indexes. The BetaShares NASDAQ 100 ETF (NDQ) has when selecting the best ETFs including: how big the ETF
been the best-performing ETF returning 23.7% per is (fund size); how much it trades (liquidity); how much it
year. The Betashares Global Sustainability Leaders ETF costs (fees and spreads); its track record (ETF and index
(ETHI) which, we hold in our Sustainable Portfolios, inception); and success in tracking its index (tracking
returned 19.8% per year. difference).
E T F C O DE ETF N A ME 1 -Y E AR R E T UR N 3-Y E AR R E T UR N 5-Y E A R R E T U R N
( P.A.) (P.A. )
OOO The BetaShares Crude Oil Index ETF - Currency Hedged (synthetic) (OOO) 79.5% -11.6% -4.6%
FUEL BetaShares Global Energy Companies ETF - Currency Hedged 43.5% 2.8% 3.5%
HACK BetaShares Global Cybersecurity ETF 31.9% 22.9% 20.7%
QRE BetaShares Resources Sector ETF 31.3% 17.2% 19.7%
OZR SPDR S&P/ASX 200 Resources Fund 30.6% 16.5% 19.3%
Source: ASX, Cboe as of March 2022.
2022 ETF REPORT | 1604
Source: Stockspot, ASX, Cboe as of March 2022 (excluding leveraged ETFs).
The Vanguard Australian Shares Index ETF (VAS)
continues to be the most popular ETF for Australians in
terms of size and flows. VAS increased its size by $3.2
billion over the past year, helped by $2.3 billion of net
inflows. Other popular ETFs were all low-cost, broad
market, tracking both Australian and global markets.
Despite the allure of short-term high returns from niche
ETFs, we are seeing investors continuing to gravitate
towards broad market ETFs which accounted for half of
the flows over the last year. Thematic/sector and active
ETFs only accounted for a small component (11% and 6%
respectively).
2022 ETF REPORT | 1704
Source: Stockspot, BetaShares, EIA.
Source: Stockspot, ASX, Cboe. New ETFs which launched between March 2021 and March 2022 have been excluded.
2022 ETF REPORT | 18Client story
“Knowing my track record with previous stock picking on
the ASX I was not interested in individual stocks but also
understood that term deposits weren’t bringing in the
returns they previously did.
After discussing my curiosity of compound interest and
investing with a friend he pointed in the direction of
Stockspot as he had just opened an account.
He explained that I didn’t need to know about investing. All
I needed to do was make regular deposits into the account
and all the investing was done for you.”
PAUL TURNER
STOCKSPOT CLIENT SINCE 2017
Read more
2022 ETF REPORT | 1905
Following trendy ETFs cost investors
more than $100 million
There were 35 new ETFs listed on the sharemarket in as well as thematic ETFs tracking cryptocurrency and
the past year. Many of these have been thematic ETFs niche technology.
that track a particular group of companies linked to a
trend or niche sector. Many ETFs are launched when the hype is at its peak.
Once launched the thematic ETF fails to outperform a
Unfortunately, these trendy ETFs have lost Australian broad market simple ETF. The average ETF tracking a
investors more than $100 million over the past year. ETF particular global sector or theme returned 7.9% over the
issuers can influence investors to chase past historical last 12 months while a typical broad global share ETF
returns by launching a trendy ETF right at the peak of its returned 21% over the same period.
interest, which normally attracts retail investor money.
We believe the best way to avoid big losses is to stay
If we include other ETFs launched over the year such clear of exciting and new ETFs. Instead, we recommend
as active fund managers, Australians lost around $150 clients stick with simple and trusted broad market ETFs.
million in these new products. The ETFs where the most Complementing your simple growth ETFs with defensive
money was lost were active fund managers such as ETFs that hold bonds and gold can also help cushion
Magellan, Fidelity and Coolabah Capital Investments, market falls.
L AU N C H DATE E T F CODE E T F NAME AM O UN T LO ST BY I N VE STO R S (M I L L I O NS )
August 2021 MHHT Magellan High Conviction Trust (Managed Fund) -$115
November 2021 CRYP BetaShares Crypto Innovators ETF -$59
March 2021 ERTH BetaShares Climate Change Innovation ETF -$28
October 2021 HGEN ETFS Hydrogen ETF -$19.7
June 2021 FIXD Coolabah Active Composite Bond Fund (Hedge -$14.4
Fund)
December 2021 FDEM Fidelity Global Demographics Fund (Managed -$14.3
Fund)
Methodology: The amount of money made/lost in new ETFs was calculated by multiplying the prior month’s assets under management by the next
month’s return, since the ETFs inception over the past 12 months.
The above methodology was then used to form the distribution of gross profits from ETFs by taking the ETF issuer’s revenue (calculated by
multiplying the ETF issuer’s FUM by the weighted asset management fee) as a portion of the total money made/lost per ETF in addition to the fees.
2022 ETF REPORT | 2005
The winning recipe of owning simple ETFs and avoiding
the latest fads has helped the Stockspot portfolios deliver
eight consecutive years of positive returns.
Source: Research Affiliates.
Source: Stockspot, LBMA, Bloomberg, MSCI as of 31 March 2022.
2022 ETF REPORT | 21Client story
“Find an appropriate investment tool taking your
personal circumstances, goals, and risk appetite into
account.
I log in once every few months to see how things are
going. But I don’t fuss too much over it.
I’m happy with my investing journey so far but mine is a
long-term investment goal – so I’m still working on it!”
MARIAM MOHAMMED
STOCKSPOT CLIENT SINCE 2020
Read more
2022 ETF REPORT | 2206
ETFs have helped regular Australian
investors outperform expert fund
managers
Since their invention in the 1990s (and first launching ETFs have been a game changer in the investment
in Australia in 2001), ETFs have opened the world of management industry. ETFs have cut barriers to entry as
investing to more Australians. everyday Australian investors can start investing from as
little as a few hundred dollars. At the same time, ETFs
Prior to ETFs, it was all about trusting the popular have also provided better returns and lower costs.
fund manager personalities. Only a few people could
actually invest in these funds because of the barriers If you had invested $10,000 equally into the 10 most
to entry like high minimum investment requirements. popular global share funds available to Australians over
Many traditional managed funds still require a minimum the last five years you would have $16,530 today. If you
of at least $20,000 to get started. had instead invested all of that money into the global
Source: Stockspot, Lonsec, Morningstar as of March 2022 using the equally-weighted average performance of the largest 10 managed funds
in the Global Equity category database, compared against the average performance of the simple indexed based global share ETF used in the
Stockspot Model Portfolios.
2022 ETF REPORT | 2306
share ETF that we recommend to clients (IOO) you Some of these popular global funds charge as much as
would today have $21,213. 1.70% per annum plus performance fees. This becomes
a perpetual drag on their performance. Investing is a
Therefore you would have been 47% better off over zero-sum game. For every winner there has to be a
the last five years investing in the simple index ETF. loser, so it’s no wonder the active funds lag the market
returns by more and more each year. The Buffett bet
This result is similar to Warren Buffett’s famous bet. result also holds true in Australia.
Warren believed that a simple S&P 500 index fund
would outperform the best and brightest minds on Australians can beat the so-called ‘rock star’ fund
Wall Street. To show his conviction, he wagered half a managers by choosing the right investments to own. We
million dollars (to be paid to a charity of his choice) to think the best way to get exposure to the market index
anyone who would take the other side of the bet. Ted is by investing in a simple low-cost broad market ETF.
Seides of Protégé Partners LLC accepted the bet which
officially commenced on 1 January 2008. By investing in the best ETFs and using smart algorithms
to rebalance periodically, the Stockspot Portfolios have
Not a single fund manager outperformed the broad outperformed at least 99% of similar funds. Clients
market index over those next 10 years and Buffett invested with Stockspot for three years or more have
famously won the bet by a huge margin. an average return of 8% per annum.
Source: Stockspot, Morningstar website comparison group of investment funds across growth, balanced and moderate multi-sector categories
to 31 March 2022. Stockspot Amethyst, Turquoise and Topaz portfolios used for comparison.
2022 ETF REPORT | 24Client story
“After researching shares further, I realised
I should instead stick to ETFs and being a
passive trader rather than trying to be an
active share trader.
My experience had shown that I had the wrong
balance. I should have had 75% of my money
with Stockspot and 25% on my regular share
trading account.”
ERIK KASEARU
STOCKSPOT CLIENT SINCE 2021
Read more
2022 ETF REPORT | 25About Stockspot
Stockspot is Australia’s largest and
most experienced online investment
adviser
Stockspot is Australia’s largest and most experienced Trusted by thousands of Australians with our
online investment adviser. We make investing easy and investment expertise.
successful.
We have outperformed at least 99% of similar
Whether you’re growing your wealth, saving for a diversified funds in Australia over the five years to
home, a family or retirement, we help you with the right 31 March 2022.
investment portfolio and guidance.
2022 ETF REPORT | 26About Stockspot
For everyday Australians
Automated investing – proven track record of
returns, lower risk than picking individual shares,
low fees and completely effortless.
Learn more
For parents and grandparents
Kids investing – invest for your kids or grandkids for
free (up to $10,000) or until they turn 18. Make them
part-owners of businesses that they use like Bega
Cheese and A2 Milk.
Learn more
Finnies 2021 – Winner, Excellence in Wealth
Management
For sustainable investors FinTech Awards 2020 – Winner, Best FinTech
Sustainable investing – aligns your financial goals
Wealth Management Platform
with your personal values, without compromising
returns (also available for kids). Finnies 2020 – Finalist, FinTech Organisation
Learn more of the Year & Excellence in Wealth
Management
For SMSF investors Finder Awards 2020 – Finalist, Best
SMSF investing – access a globally diversified Investment Innovation
portfolio with a proven track record of growth and
income. We will keep your SMSF portfolio balanced
and you can speak to a Stockspot financial adviser
whenever you need.
Learn more
2022 ETF REPORT | 27Our expert team of investment advisers are
available to help when you need it.
Visit our website to schedule a call
www.stockspot.com.au
Email us with any questions
enquiries@stockspot.com.au
Call us to chat with one of our team
(02) 8091 8090
Monday - Friday, 9am - 5pm AEST
...
All data in this report is as of March 2022. Stockspot Pty Ltd ABN 163 214 319 is a Corporate Authorised Representative (No. 453421)
of Sanlam Private Wealth (AFS License No. 337927). Any advice contained in this brochure is general advice only and has been
prepared without considering your objectives, financial situation or needs. Before making any investment decision we recommend
that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice. Investing
into financial products involves risk. Past performance of financial products are no assurance of future performance. The actual
performance of your portfolio may vary from our published returns due to the timing of investments, re-balancing and your fee tier.
Please read our Financial Services Guide before deciding whether to obtain financial services from us.You can also read
