Australian share ETFs continue to gain in popularity.
The last 12 months to 30 September 2024 has seen the Australian ETF industry grow by 45.4%, or $70.8B.
Due to the popularity of our Australian ETF Report, we are road testing five popular Australian share ETFs, comparing them across six different factors, saving you the hassle when trying to work out what are the best Australian share ETFs to buy in 2024.
ETFs track a market index rather than taking bets on individual companies. For this reason, their management fees are much lower than typical active fund managers. Tracking a market index also offers the benefits of transparency and potential tax efficiency. ETF investors directly benefit from share capital gains, dividends and franking credits paid by shares contained within an ETF.
See our ETF Performance Comparison Tables to see all categories.
Size
| ASX code | ETF name | Size ($B)* |
| STW | SPDR S&P/ASX 200 ETF | 5.7 |
| VAS | Vanguard Australian Shares Index ETF | 16.9 |
| IOZ | iShares Core S&P/ASX 200 ETF | 6.2 |
| MVW | VanEck Australian Equal Weight ETF | 2.5 |
| A200 | Betashares Australia 200 ETF | 6.1 |
VAS and IOZ are the largest Australian share ETFs managing $16.9 billion and $6.2 billion respectively.
MVW has been growing fast and now manages over $2.5 billion while the most recently launched A200 ETF from Betashares debuted in May 2018 with $50 million under management and has since grown to $6.1 billion.
Size is important because ETFs must reach a certain size to become viable.
As ETFs gather more assets, it becomes easier for them to cut their expense ratios (fees) to continue attracting more funds.
On the other hand, ETFs which haven’t achieved critical mass can be forced to shut down and return investor funds or increase their fees to cover their costs.
Costs
| ASX code | ETF name | MER (% p.a.) |
| STW | SPDR S&P/ASX 200 ETF | 0.05 |
| VAS | Vanguard Australian Shares Index ETF | 0.07 |
| IOZ | iShares Core S&P/ASX 200 ETF | 0.05 |
| MVW | VanEck Australian Equal Weight ETF | 0.35 |
| A200 | Betashares Australia 200 ETF | 0.04 |
ETF expense ratios are becoming more competitive in Australia with the fee war expected to continue.
These ETFs have been undercut by Betashares when they launched A200 at 0.07% p.a., which they then slashed to 0.04% in March 2023.
This sent a strong signal from Betashares that it intends to compete with State Street, Vanguard and iShares in this category. Demonstrative of the price sensitivity, STW and MVW have fees of 0.05%, while MVW remains uncompetitive with a fee of 0.35%.
VAS is the most profitable ETF, earning over $11.8 million in revenue per year given its large share of the Australian share ETF pie, more than enough to be sustainable.
On the other hand, the more recently launched A200 is earning around $2 million p.a. in fees based on its $6.1 billion AUM.
Read more here about how Stockspot takes the guesswork out of choosing ETFs and builds you a diversified portfolio online.
The 3 lowest cost ETFs are now within 0.01% p.a. of each other on fees. That’s great news because costs are one of the only factors you can fully control when investing in Australian shares. The less you pay a fund, the more of the returns you keep in your pocket.
That said, costs have converged to the point where investors need to carefully consider other factors including the funds’ commercial viability, liquidity and track record.
Slippage
| ASX code | ETF name | % Spread |
| STW | SPDR S&P/ASX 200 ETF | 0.03 |
| VAS | Vanguard Australian Shares Index ETF | 0.02 |
| IOZ | iShares Core S&P/ASX 200 ETF | 0.04 |
| MVW | VanEck Australian Equal Weight ETF | 0.06 |
| A200 | Betashares Australia 200 ETF | 0.03 |
Slippage refers to how much you lose by crossing the spread when buying or selling an ETF. It’s calculated by the average percentage difference between the best buyer and seller during market hours.
It has more of an impact if you’re trading an ETF or making regular contributions because you’ll need to cross the spread more often to get invested.
VAS has the lowest slippage at 0.02% followed by STW and A200 at 0.03% and then closely behind IOZ sits at 0.04%. MVW has the highest slippage at 0.06%
By comparison the average Australian Equity managed fund offered on the ASX mFunds platform charges a bid/ask spread of 0.55% – more than 27 times more than VAS and A200!
Liquidity
| ASX code | ETF name | Daily Transacted Value ($m) |
| STW | SPDR S&P/ASX 200 ETF | $5.2m |
| VAS | Vanguard Australian Shares Index ETF | $21.7m |
| IOZ | iShares Core S&P/ASX 200 ETF | $14.1m |
| MVW | VanEck Australian Equal Weight ETF | $2.6m |
| A200 | Betashares Australia 200 ETF | $9.0m |
Liquidity refers to the amount of turnover (or available turnover) in an ETF and it is measured by average daily volume on the ASX.
Volume is a measure of market making activity and trading interest which makes it a reasonable estimate of liquidity.
It’s worth mentioning that it may not reflect liquidity in the underlying stocks which is typically much deeper for broad Australian share ETFs.
However in times of crisis investors may not be able to rely exclusively on market makers for liquidity so daily volume is a relevant figure.
VAS has the highest liquidity in the category, with over $21 million being traded per day. IOZ is the second highest at over $14 million while A200 follows behind at $9 million.
MVW has a daily traded volume of $2.6 million, which is the lowest volume of those compared.
Returns
| ASX code | ETF name | 5 Year Total Return p.a. |
| STW | SPDR S&P/ASX 200 ETF | 9.7% |
| VAS | Vanguard Australian Shares Index ETF | 9.6% |
| IOZ | iShares Core S&P/ASX 200 ETF | 9.6% |
| MVW | VanEck Australian Equal Weight ETF | 8.3% |
| A200 | Betashares Australia 200 ETF | 9.9% |
The Australian share ETFs all generated similar returns over the last 5 years with IOZ, STW, VAS and IOZ all returning around 9.6 to 9.9% p.a.
A200 outperformed its peers by generating a 5 year return of 9.9% while MVW underperformed comparatively, generating 8.3% given its skew to smaller companies.
Where STW, VAS, IOZ and A200 are market-size weighted indices, MVW is an equal-weight index. This leads MVW to take weight out of the largest 10-15 shares and spread it across smaller companies.
The performance of these smaller shares relative to the largest companies is a key driver of differences between MVW and market-size based ETFs.
The longer the track record of an ETF and the index it mirrors, the better understanding you have of how an index reacts to different market conditions as well as how closely the ETF is tracking its index.
Most of the broad Australian share indices like the S&P/ASX 200 and S&P/ASX 300 have existed for some time, so you can see how they performed through boom times like 2003-2007 as well as periods of market stress like 2008.
Also important is the ‘tracking error’ which measures how well an ETF has done at mirroring its index. For example, over the last 10 years VAS has generated 8.0% p.a. in returns compared to the benchmark (S&P/ASX 300) which has delivered 7.9% p.a.
Tracking error is rarely zero because there are various factors that prevent an ETF from perfectly mirroring its index including fees. In the case of VAS, the difference roughly equals its fees (~0.10%), which means it’s doing its job correctly.
| ASX code | ETF name | Index history |
| STW | SPDR S&P/ASX 200 ETF | 24 years |
| VAS | Vanguard Australian Shares Index ETF | 24 years |
| IOZ | iShares Core S&P/ASX 200 ETF | 24 years |
| MVW | VanEck Australian Equal Weight ETF | 21 years |
| A200 | Betashares Australia 200 ETF | 13 years |
Stockspot’s verdict
Since 2014, we’ve invested on behalf of our clients into the Vanguard Australian Shares Index ETF (VAS).
What we originally liked about this fund was its low costs, as well as Vanguard’s consistent track record of lowering its fees – not just in response to competitors, but simply because it can.
We continue to favour VAS for a few reasons:
- VAS’ low expense ratio (0.07% p.a.) and global track record of reducing costs. By comparison, the largest Australian share ETF (STW) waited 7 years before it lowered its costs from 0.29% to 0.19% in December 2015 and then another 5 years to reduce to 0.13%. It is not surprising that VAS overtook STW in July 2019 as the largest Australian share ETF.
- VAS’ broader ASX 300 exposure compared to STW and IOZ which track the ASX 200
- VAS’ large size ($16.9 billion) and liquidity ($21.7 million per day)
- VAS’ low tracking error and slippage
- VAS’ consistent return history and the 24 year track record of the S&P/ASX 300 index
While MVW can go through some periods of good relative performance, we aren’t compelled by the equal-weight strategy or other non-market cap weighted strategies for reasons we explained in our article ‘Should you buy into smart beta ETFs?‘.
For clients who want more exposure to smaller shares, we recommend adding a pure small cap tilt using the Vanguard MSCI Australian Small Companies Index ETF (VSO) as a Stockspot Theme.
The VSO fund charges 0.30% p.a. and returned 8.7% p.a. over the 5 years to 30 September 2024, slightly outperforming MVW.
We continue to be confident in recommending VAS to our clients due to its size, commercial viability, liquidity and track record.
As a final note, it’s great to see the original Australian share ETF (STW) as well as global ETF giants (VAS and IOZ), different index strategies (MVW) and local disruptors (A200) all have broad Australian share ETFs available.
The Australian ETF ecosystem continues to grow at a rapid pace which is fantastic news for investors.
With the ETF market changing regularly, it’s hard to know which ETFs should be in your diversified portfolio. Stockspot have over 10 years experience in building and managing your share market portfolio for you. Leave the tough decisions on which shares to buy this year up to us, so you can get on with enjoying life and not having to worry about picking stocks. Find out more about what’s in our portfolios or take our quiz and see which portfolio we’d recommend for your risk tolerance and investment timeframe.
