International share ETFs and U.S. share ETFs have had a huge increase in popularity for individual and SMSF investors in Australia.
As of 31 March 2023 there is $70 billion invested in ETFs tracking global shares on the ASX and Cboe Australia, representing over half of the Australian ETF market. The largest and most popular track either a broad global index or the U.S. share market which is considered to be a proxy for global shares.
Each year we compare all 250+ ETFs in our ETF Report. Here we road test 12 popular Global share ETFs, comparing them across 5 factors, as well as summarising our favourites.
What are ETFs?
ETFs track a market index rather than taking bets on individual companies. For this reason, their management fees are much lower than typical ‘active’ fund managers. Tracking a market ‘index’ also offers the benefits of transparency and potential tax efficiency.
ETF investors directly benefit from share capital gains, dividends and franking credits paid by shares contained within an ETF. The majority of funds compared in this article are index ETFs, only the Magellan fund is an active fund which sits inside an ETF-like listed structure.
We have included the Magellan fund because of its size and popularity however, investors should understand that this is an actively managed fund. This article explains the difference between active and index investing.
Size
| ASX code | ETF name | Size ($B)* |
| IOO | iShares S&P Global 100 ETF | 2.6 |
| IHOO | iShares S&P Global 100 ETF (AUD Hedged) | 0.3 |
| IVV | iShares S&P 500 ETF | 5.2 |
| IHVV | iShares S&P 500 ETF (AUD Hedged) | 1.1 |
| MGOC | Magellan Global Equities Fund (Managed Fund) | 7.2^ |
| MHG | Magellan Global Equities Fund (Managed Fund) (AUD Hedged) | 0.1 |
| VGS | Vanguard MSCI Index International Shares ETF | 5.6 |
| VGAD | Vanguard MSCI Index International Shares ETF (Hedged) | 2.2 |
| WXOZ | SPDR S&P World ex Australian Fund | 0.3 |
| WXHG | SPDR S&P World ex Australian Fund (Hedged) | 0.2 |
| VEU | Vanguard All-World ex US Shares Index ETF | 2.4 |
| VTS | Vanguard US Total Market Shares Index ETF | 3.1 |
*Total fund assets under management at 31 March 2023 (Source: ASX)
^ Magellan Global Fund merged it’s original listed funds (MGE and MGG) with it’s unlisted managed fund to form a new structure (MGOC)
There are 8 global share ETFs with over $1 billion under management (IOO, IVV, MGOC, VGS, VEU and VTS). With the exception of Magellan’s new structure, the S&P 500 ETF (IVV) has been the most popular, attracting over $4.8 billion on the ASX.
The U.S. share market has outperformed other global markets over the last 5 years so investors have gravitated to this market for their global exposure. The unhedged global ETFs (IOO, IVV, MGOC, VGS and WXOZ) have drawn in more funds than their hedged equivalents, as a falling Australian dollar has seen unhedged products outperform.
This would suggest that Australian investors are comfortable with the addition of currency diversification when they invest in global shares. A falling Australian dollar has made unhedged ETFs more attractive over the last 3 and 5 years.
Overall there is $30 billion invested in the 12 largest global ETFs. For the Stockspot Portfolios we have invested our clients into the S&P Global 100 ETF (IOO).
Our clients also have the option to add the S&P 500 ETF (IVV) for extra US shares or the All-World Ex-US ETF (VEU) for extra non-US shares as part of Stockspot Themes.
You can skip ahead to Stockspot verdict to see why we’ve selected these funds for our clients and how they’ve performed.
Costs
| ASX code | ETF name | MER (% p.a.) |
| IOO | iShares S&P Global 100 ETF | 0.40 |
| IHOO | iShares S&P Global 100 ETF (AUD Hedged) | 0.43 |
| IVV | iShares S&P 500 ETF | 0.04 |
| IHVV | iShares S&P 500 ETF (AUD Hedged) | 0.10 |
| MGOC | Magellan Global Equities Fund (Managed Fund) | 1.35 |
| MHG | Magellan Global Equities Fund (Managed Fund) (AUD Hedged) | 1.35 |
| VGS | Vanguard MSCI Index International Shares ETF | 0.18 |
| VGAD | Vanguard MSCI Index International Shares ETF (Hedged) | 0.21 |
| WXOZ | SPDR S&P World ex Australian Fund | 0.18 |
| WXHG | SPDR S&P World ex Australian Fund (Hedged) | 0.21 |
| VEU | Vanguard All-World ex US Shares Index ETF | 0.08 |
| VTS | Vanguard US Total Market Shares Index ETF | 0.03 |
Management fees for this group of ETFs varies widely, from 0.03% for the Vanguard and iShares US share ETFs to 1.35% for the Magellan active fund.
The pricing for the index funds have been driven by competition, with new ETFs tending to be launched at lower pricing than previously listed similar funds to gain new flows and switching.
The Vanguard products will continue to put fee pressure on iShares and SPDR, particularly where similar Vanguard funds exist. IOO has higher fees than VGS although IOO has performed better even on an after-fee basis.
Slippage
| ASX code | ETF name | % spread |
| IOO | iShares S&P Global 100 ETF | 0.07 |
| IHOO | iShares S&P Global 100 ETF (AUD Hedged) | 0.11 |
| IVV | iShares S&P 500 ETF | 0.04 |
| IHVV | iShares S&P 500 ETF (AUD Hedged) | 0.05 |
| MGOC | Magellan Global Equities Fund (Managed Fund) | 0.43 |
| MHG | Magellan Global Equities Fund (Managed Fund) (AUD Hedged) | 0.56 |
| VGS | Vanguard MSCI Index International Shares ETF | 0.04 |
| VGAD | Vanguard MSCI Index International Shares ETF (Hedged) | 0.05 |
| WXOZ | SPDR S&P World ex Australian Fund | 0.15 |
| WXHG | SPDR S&P World ex Australian Fund (Hedged) | 0.19 |
| VEU | Vanguard All-World ex US Shares Index ETF | 0.07 |
| VTS | Vanguard US Total Market Shares Index ETF | 0.05 |
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.
Slippage tends to be higher for global ETFs when compared to Australian ETFs since many global markets are closed when the Australian Securities Exchange (ASX) is open.
This leads market makers to maintain a wider ‘spread’ during ASX hours. VGS and IVV currently have the lowest slippage at 0.04%, followed closely by VGAD, VTS and IHVV. By comparison, the average Australian Share ETF has a bid/ask spread of 0.05%.
Index ETFs generally have lower slippage than active funds which means investors in index funds aren’t starting as far behind the 8 ball when they invest.
For example, a round-trip of buying, holding and selling the Magellan Global Equities Fund (MGOC) over the last 3 years would have incurred 2 buy-sell spreads plus management fees which totals 5% of costs (that’s before performance fees).
The fund has generated net returns of 11.5% which means that an investor holding for 3 years would have paid away over 42% of their net return in costs.
By comparison an investor in IVV over the same time period would have round-trip costs of 0.20% and a net return of 49.2% so only paid away 0.4% of their return in cost.
That’s a considerable amount of costs to pay for the Magellan paid over the index ETF owner including getting in and out! IVV has also outperformed Magellan significantly with the fund unable to outperform it’s benchmark over the last 10 years.
It shows why active funds management as an industry is much more lucrative for the fund managers than the end investors. Fred Schwed wrote about this timeless concept in one of the best investing books of all time ‘Where are all the customers yachts?’.
Liquidity
| ASX code | ETF name | Daily Transacted Value ($m) |
| IOO | iShares S&P Global 100 ETF | $4.3 |
| IHOO | iShares S&P Global 100 ETF (AUD Hedged) | $0.8 |
| IVV | iShares S&P 500 ETF | $8.9 |
| IHVV | iShares S&P 500 ETF (AUD Hedged) | $8.3 |
| MGOC | Magellan Global Equities Fund (Managed Fund) | $3.9 |
| MHG | Magellan Global Equities Fund (Managed Fund) (AUD Hedged) | $0.3 |
| VGS | Vanguard MSCI Index International Shares ETF | $10.9 |
| VGAD | Vanguard MSCI Index International Shares ETF (Hedged) | $4.5 |
| WXOZ | SPDR S&P World ex Australian Fund | $0.1 |
| WXHG | SPDR S&P World ex Australian Fund (Hedged) | $0.2 |
| VEU | Vanguard All-World ex US Shares Index ETF | $5.0 |
| VTS | Vanguard US Total Market Shares Index ETF | $8.7 |
Liquidity refers to the amount of turnover (or available turnover) in an ETF. We measure it 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 global share ETFs.
However in times of crisis and during ASX trading hours investors may not be able to rely exclusively on market makers for liquidity so daily volume is a relevant figure. Liquidity closely matches up with ETF size.
Eight of the largest global ETFs turn over more than $1 million dollars worth of volume per day.
Returns
| ASX code | ETF name | 3 Year Total Return (p.a.) |
| IOO | iShares S&P Global 100 ETF | 14.2% |
| IHOO | iShares S&P Global 100 ETF (AUD Hedged) | 15.3% |
| IVV | iShares S&P 500 ETF | 14.3% |
| IHVV | iShares S&P 500 ETF (AUD Hedged) | 14.5% |
| MGOC | Magellan Global Equities Fund (Managed Fund) | 3.7% |
| MHG | Magellan Global Equities Fund (Managed Fund) (AUD Hedged) | 4.9% |
| VGS | Vanguard MSCI Index International Shares ETF | 12.8% |
| VGAD | Vanguard MSCI Index International Shares ETF (Hedged) | 14.6% |
| WXOZ | SPDR S&P World ex Australian Fund | 11.4% |
| WXHG | SPDR S&P World ex Australian Fund (Hedged) | 13.7% |
| VEU | Vanguard All-World ex US Shares Index ETF | 9.6% |
| VTS | Vanguard US Total Market Shares Index ETF | 14.3% |
Total return to 31 March 2023. (Source: ASX)
ETFs with more U.S. share market exposure (IVV and VTS) have produced the best 3 year returns while the funds with the lowest U.S. exposure (VEU) have underperformed.
U.S. shares have had strong 3 and 5 year returns thanks to the performance of shares like Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Berskhire Hathaway (BRKB) and Facebook (FB).
The outperformance of US shares vs the rest of the world has historically been cyclical so is likely to reverse at some point in the market cycle.
Of the broad global ETFs without a specific US focus, IOO (14.2%) has performed better than VGS (12.8%) and WXOZ (11.4%) over the last 3 years. The unhedged versions of each of these ETFs have beaten the hedged versions due to the Australian dollar falling over the long term.
The Magellan active fund (MGOC) has underperformed most of the broad global ETFs available, and like many other active managers in this space, has underperformed the S&P 500 ETF (IVV).
It shows again why the benefit of active funds management generally accrues to the manager rather than the end investor. It’s no wonder 92% of US active fund managers underperformed the index over the last 15 years.
This is the key reason we avoid active funds for our clients. Indexing tends to do better than active management due to investing being a zero sum game.
Indexing succeeds in down markets too
Stockspot’s verdict
Since 2014 we’ve invested on behalf of our clients into the S&P Global 100 ETF (IOO).
The fund invests in the largest 100 companies in the world so provides great diversification across the world’s largest and most successful businesses which are predominantly located in the US, UK, Switzerland, France, Germany, Japan and Korea.
Despite slightly higher fees than other options, this fund’s focus on large companies has been the driver behind IOO outperforming the similar broad global ETFs: VGS and WXOZ.
This has meant our clients have earned 4.2% over 3 years by being in IOO rather than VGS.
You can see Stockspot Portfolios for more details on what other ETFs are inside the portfolios.
Broad global share ETFs
| ASX code | ETF name | 1 Year Total Return (p.a.) | 3 Year Total Return (p.a.) |
| IOO* | iShares S&P Global 100 ETF | 1.6% | 14.2% |
| WXOZ | SPDR S&P World ex Australia Carbon Control Fund | 0.1% | 11.4% |
| VGS | Vanguard MSCI Index International Shares ETF | 1.4% | 12.8% |
Total return to 31 March 2023. (Source: ASX)
* Selected Stockspot fund
We continue to favour IOO for our clients due to its size, track record and exposure to the world’s largest 100 companies. We have already seen SPDR be more competitive on their fees by reducing the cost of WXOZ from 0.30% to 0.16% in April 2022 before changing the index methodology to be more focused on ESG and raising the fee to 0.18%, in order to challenge the more competitively priced Vanguard funds.
For clients who want to add extra U.S. shares to their portfolios we offer the iShares S&P 500 ETF (IVV) which can be added as a theme. It’s currently our most popular theme, likely because of its strong recent performance.
For those looking to invest globally but who would prefer to avoid U.S. companies, we offer the Vanguard All-World ex US Shares Index ETF. It hasn’t performed as well over 5 years but is more insulated if tech shares or the U.S. economy falter with more even diversification across Japan, the UK, China, France, Germany, Switzerland and Canada.
| ASX code | ETF name | 1 Year Total Return (p.a.) | 3 Year Total Return (p.a.) | 5 Year Total Return (p.a.) |
| IVV* | iShares S&P 500 ETF | -0.3% | 14.3% | 13.9% |
| VEU* | Vanguard All-World ex US Shares Index ETF | 5.0% | 9.6% | 5.6% |
Total return to 31 March 2023. (Source: ASX)
* Selected Stockspot fund
It’s wonderful to see such a broad range of Global ETF options available for Australian investors. We’ll continue to review the global ETF universe to ensure our clients get access to the best options available based on our careful analysis. Watch this video to find out more about global share ETFs.
