Technology companies have taken over the global markets, channelling global demand for goods and services into huge gains for investors. Tech ETFs have ridden that wave too, offering exposure to one of the market’s most influential segments at a time when it is hotter than ever before.
Tech stocks, like any emerging sector, can be volatile, and for every skyrocketing Nvidia stock, there is another that brings warnings of a bubble burst similar to that seen in the early 2000s, when tech first took hold of the market.
The Australian share market only has a 3% allocation to technology companies compared to nearly 27% in the U.S.
Exchange traded funds (ETFs), can provide access to the best performing tech companies around the world while also limiting volatility by providing diversified exposure. Investing in technology ETFs can offer investors broad-based technology exposure, or Stockspot investors with balances over $50,000 can access tech themes to increase the overall allocation to tech companies as a satellite investment complimenting their diversified portfolios.
The following ETFs are listed on ASX that track the broad technology sector:
- BetaShares NASDAQ 100 ETF (NDQ)
- BetaShares Asia Technology Tigers ETF (ASIA)
- The Global X Morningstar Global Technology ETF (TECH)
- Global X FANG+ ETF (FANG)
Note: NDQ also has a hedged version called the BetaShares NASDAQ 100 ETF – Currency Hedged (HNDQ).
Stockspot reviews and compares more than 250 ETFs in our annual Stockspot ETF Report.
In this article, we road test the best technology ETFs in Australia across a range of different metrics to provide our analysis on the most suitable choice for investors.
- Size
- Costs and slippage
- Liquidity
- Returns and track record
- Exposure and holdings
- Verdict and conclusion
Size
NDQ is the largest ETF in the broad technology category with almost $5 billion in funds under management, largely due to its first-mover advantage (launching in May 2015), strong returns, and because it tracks a well-known index, the NASDAQ.
HACK is second on $953 million, the newest of the funds, FANG, is third with $713 million, while ASIA and TECH have $514 million and $323 million respectively.
When it comes to cost, there are two components for ETF investors to consider – the management fee of the ETF and the costs of trading (i.e. slippage).
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.
FANG is the lowest-cost technology ETF charging 0.35% per year. NDQ is the clear leader on slippage at 0.04%, while FANG ranks second at 0.09%.
ASIA is the most expensive ETF in this category charging 0.67% due to tracking Asian markets which may not be as liquid or have a narrower focus.
| TICKER CODE | MANAGEMENT FEE | BUY/SELL SPREADS (SLIPPAGE) |
| NDQ | 0.48% | 0.04% |
| ASIA | 0.67% | 0.19% |
| TECH | 0.45% | 0.27% |
| FANG | 0.35% | 0.09% |
| HACK | 0.67% | 0.13% |
Liquidity
NDQ is the most liquid technology ETF, trading over $8.3 million in average daily volume. FANG and HACK are the next most traded tech ETFs with around $2.0m and $1.3m traded daily respectively. TECH is the least liquid in the category, only trading just over $307,000 daily.
Returns and track record
Most technology ETFs listed on the ASX are relatively new and were only launched in the last few years to take advantage of strong interest in the sector and thus do not have a long track record.
NDQ has been the best performing technology ETF returning 20.6% p.a. over the last five years, followed by HACK, returning 16.4% p.a. over the last five years.
The more geographically diverse TECH ETF underperformed comparative to NDQ, ASIA, FANG and HACK, over the past year, returning 14% while the others returned between 21.3% and 42.6%.
ASIA has had a tough few years having a 3 year return of 0.0% as regulation in China has dampened returns, but has begun to see a rebound in performance returning 30.1% over the past 1 year.
This wide range of returns shows how widely tech returns can vary given the differing geographic regions, interest rate climates and economic environments at play.
| TICKER CODE | 1 Year Return | 3 Year Return | 5 Year Return |
| NDQ | 26.3% | 12.0% | 20.6% |
| ASIA | 30.1% | 0.0% | 10.5% |
| TECH | 14.0% | 3.1% | 12.8% |
| FANG | 42.6% | 18.5% | N/A |
| HACK | 21.3% | 7.9% | 16.4% |
Exposure and holdings
While technology ETFs track a basket of tech stocks, they can have different underlying holdings and subsequent weights based on the indexes they track.
NDQ tracks the NASDAQ 100 Index which looks at the top 100 non-financial companies listed on the NASDAQ exchange.
ASIA tracks the Solactive Asia Ex-Japan Technology & Internet Tigers Index and has a focus on technology companies in China, Taiwan, South Korea, India and Singapore.
TECH tracks the Morningstar Developed Markets Technology Moat Focus Index which comprises up to 50 technology companies with a strong competitive advantage and attractive valuations.
FANG tracks the NYSE FANG+ index which equally weights high growth technology companies.
Here are the top 10 holdings in NDQ, ASIA, TECH and FANG:
| NDQ | ASIA | TECH | FANG | |
| 1 | Apple | Alibaba Group | Shopify Inc | NVIDIA |
| 2 | Microsoft | Tencent | Autodesk Inc | Broadcom |
| 3 | NVIDIA | Taiwan Semiconductors | Salesforce | Meta Platforms inc |
| 4 | Broadcom | Samsung Electronics Co | SS&C Technologies Holdings Inc | Apple |
| 5 | Meta Platforms inc | Infosys | Cognizant Technology Solutions Corp | Crowdstrike Holdings Inc |
| 6 | Amazon | SK Hynix | Workday Inc | Alphabet Inc |
| 7 | Tesla | Hon Hai Precision | Littelfuse Inc | Netflix Inc |
| 8 | Costco Wholesale | NetEase | Uber Technologies Inc | ServiceNow Inc |
| 9 | Alphabet Class A | JD.com | Block Inc | Amazon.com Inc |
| 10 | Alphabet Class C | MediaTek | Murata Manufacturing Co Ltd | Microsoft |
| Top 10 Holdings | 50.9% | 69.3% | 41.7% | 100% |
What about other thematic tech ETFs?
While broader technology ETFs are diversified across the whole technology sector, there has been a rise of newer thematic ETFs that track very specific types of technology sectors.
| ASX Code | Size | Cost | Sum of 1 Year Total Return | Sum of 5 Year Total Return |
| SEMI | $325,000,000 | 0.45% | 45.9% | N/A |
| ROBO | $222,000,000 | 0.69% | 6.3% | 8.2% |
| RBTZ | $261,000,000 | 0.57% | -2.9% | 10.0% |
| MTAV | $7,000,000 | 0.69% | 33.0% | N/A |
| ITEK | $5,000,000 | 0.55% | 11.2% | N/A |
| IPAY | $4,000,000 | 0.67% | 30.1% | N/A |
| IBUY | $2,000,000 | 0.67% | 13.0% | N/A |
While these niche thematic ETFs offer exposure to new and interesting industries, investors need to be cautious as these ETFs are also susceptible to greater volatility, which is why we avoid niche thematic ETFs for our clients at Stockspot.
Verdict and conclusion
We prefer broad technology ETFs such as NDQ and ASIA rather than niche technology ETFs.
We offer NDQ and ASIA as part of our Stockspot Themes and help to blend them into a broadly diversified portfolio for clients.
We like that they are large in size, have deep liquidity and track broad market indexes that are not too niche.
Click here to learn more about our Stockspot Themes Tech ETF bundles
Technology ETFs do come with their own set of risks, and in order to avoid your portfolio being overly exposed to a tech crash like 2000, we recommend clients only invest a small portion of their overall portfolio in these sector ETFs.
The core part of our client’s portfolios are invested in a diversified mix of ETFs across different assets including shares, bonds and gold.
