The iShares S&P/ASX 20 ETF (ASX: ILC) and SPDR S&P/ASX 200 Listed Property Fund ETF (ASX: SLF) are exchange-traded funds (ETFs) operating in the Australian shares sector, and aiming to make investing as simple as possible.
How the ILC and SLF ETFs fit in a portfolio
The iShares ILC ETF provides exposure to the largest 20 Australian stocks, giving you targeted exposure to Australian blue-chip companies. This is a low-cost way to access top Australian companies through a single fund.
The SLF ETF by SPDR invests in shares/securities of listed real estate investment trusts (REITs). Investors can use these property-focused ETFs to get exposure to a broad basket of trusts and companies exposed to property, including office spaces, commercial rental spaces and construction projects.
See our ASX SLF report – it’s totally free.
Okay, so we know what they’re designed to do, the sectors and strategies. Now what? One of the quick ways to compare ETFs like SLF and ILC is to study the fee load. No one likes paying high fees if they don’t need to. Here at Best ETFs and Rask Austalia, we begin by analysing the fees and ‘all in’ costs of an ETF or fund. Our team will score ETFs based on management fees, plus any other costs, then put them into quartiles by sector, strategy and across the entire ETF market.
To make this article easier to digest, we’ll just study the fees or ‘management expense ratio’ (MER). Using data for July 2021, the ILC ETF has an MER of 0.24% while the SLF ETF had a yearly fee of 0.40%. As a result, ILC comes out on top. Keep in mind, a more insightful metric to know is the fee quartiles that these ETFs find themselves in (note: quartile 1 is best). Meaning, we take all the Australian shares ETFs in our database and put them into 4 quartiles, based on their fees. For example, any ETF which has a fee below 0.3% would be considered in our first (best) quartile.
Track record
Let’s look at the past results. Keep in mind, performance isn’t everything — and past performance is not indicative of future performance. It’s just one part of a much bigger picture. The reason we say performance is not everything is because of volatility of financial markets and the economy from one year to the next. Some ETFs and funds can put in a strong return one year just to generate weak returns the next time around. That’s why we prefer three-year or seven-year track records over one-year track records. It can smooth out the temporary performances caused by external factors. Both ETFs have achieved our three-year performance hurdle. As of July 2021, the ILC ETF had an average annual return of 11.98%. During the same time, the SLF ETF returned 7.22%.
One final point: the ETF provider is important. In Australia, we believe there are a handful of stand-out ETF providers and many that are mid-pack or very fresh. As you guessed, the provider backing the ILC ETF is iShares. And iShares ranks highly for our scores of ETF providers and issuers in Australia. We consider iShares to be among the best ETF providers in Australia and globally. SLF’s ETF provider on the ASX is SPDR. SPDR ranks highly for our scores of ETF providers and issuers in Australia. We think SPDR is one of Australia’s top 10 ETF providers for advisers and institutions, and its ETFs on the ASX provide good exposure to particular financial markets for retail investors.
What it all means
To keep reading about these two ETFs, be sure to visit our free ILC ETF report or SLF ETF review.
In summary, the ILC ETF rates better for our internal scoring methodology but not by much compared to SLF.
Please, keep in mind, there is much more to choosing a good ETF. That’s why you should now use these skills to find the best ETF you can. If you want the name of our team’s top ETF pick for 2021, keep reading…
