I think that BetaShares Global Quality Leaders ETF (ASX: QLTY) is one of the best exchange-traded funds (ETFs) on the ASX.
This is an investment offered by BetaShares, one of the biggest ETF providers in Australia.
There are a few reasons why I really like it, which also describes what it is:
Quality
The word ‘quality’ is in the name of the ETF, but what does it mean? Quality can mean different things to different investors.
For this ETF, it isn’t just ranking ideas on one metric. There are four metrics that it looks at: return on equity (ROE), debt to capital, cash flow generation ability and earnings stability.
If a business ranks well on each of these factors, then it has a good chance of making it into the portfolio.
Globally diversified
This ETF is looking at potential businesses from across the world.
The US does receive the biggest allocation of 62.1%, but there are plenty of other countries that are represented with a weighting of at least 2%: Japan (11.9%), Switzerland (4.5%), Denmark (3.5%), Hong Kong (3.3%), France (3.1%), the UK (2.2%), Germany (2.1%) and Netherlands (2%).
I think it lowers the risk for the ETF to have holdings from across the world, rather than just one place.
In terms of industries or sectors, the biggest two weightings are to IT (40.8%) and healthcare (21%). These are the two sectors where I think investors are most likely to find those high-performing, high-quality ideas.
Reasonable fees
Considering all of the global diversification and quality analysis that goes on within this ETF, I think the annual fee of just 0.35% is very reasonable. Whilst that’s not the cheapest around, it’s still pretty low and the returns have been solid.
Solid prior returns
Past performance is not a reliable indicator of future performance. But, since inception in November 2018, it has done very well – the average net return per year has been 23.75% since it started.
When you put the four factors of low debt, good cashflow, reliable earnings and strong shareholder returns together, it makes it fairly likely that this ETF will be able to do well. However, I wouldn’t expect the next three years to be as good as the last three.
Even so, I think this is a solid ETF which ticks lots of investment boxes.
