The iShares S&P/ASX 20 ETF (ASX: ILC) and BetaShares FTSE RAFI Australia 200 ETF (ASX: QOZ) are top ETFs. Let’s take a quick look at both.
A look at iShares ILC and the QOZ ETF
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 BetaShares QOZ ETF provides exposure to a ‘fundamentally weighted’ index of 200 large Australian shares. This ETF focuses on weighting the portfolio with a focus on ‘economic importance’ rather than market capitalisation, while also aiming to outperform traditional market-cap weighted indices.
Learn more about the QOZ ETF with our full analysis page. Get our QOZ review.
So where do we start analysing QOZ and ILC? In addition to using our years of experience analysing ETFs to ‘get a feel’ for the ETF, there are simple checks and balances our team uses to compare similar ETFs.
The first is fees. We score ETFs based on their management fees and costs and we take into account the spread. We’ll then compare these ‘all in’ fees and costs across sectors, strategy types and ETF providers.
We’ll keep it basic and just study the fees. Based on our data for December 2021, the ILC ETF has a management expense ratio (MER) of 0.24% while the QOZ ETF’s yearly fee was 0.40%.So ILC comes out on top. That said, a more useful metric to know is the fee quartiles that these ETFs find themselves in (note: quartile 1 is best). For example, any ETF which has a fee below 0.3% would be considered in our first (best) quartile.
Show me the money
It’s time to study the track record. 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 compelling return one year just to generate subpar 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 December 2021, the ILC ETF had an average annual return of 14.08%. During the same time, the QOZ ETF returned 13.13%.
There’s one more important thing to consider: the company that starts and runs the ETF. They are in charge of operating the ETF on the ASX. The provider of the ILC fund is iShares. 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. Meanwhile, the company responsible for QOZ is BetaShares. Betashares ranks highly for our scores of ETF providers and issuers in Australia. We believe BetaShares is one of the leading providers of index and non-index style products to retail investors in Australia.
Next steps
Be sure to visit our free ASX ILC review or ASX QOZ ETF review.
For us, the ILC ETF ranks greater for our internal scoring methodology but not by much.
We hope this article helped you analyse ETFs. Don’t forget, there’s a lot more to investing well than what we just outlined (risks, diversification, other potentially better ETFs, etc.). Our analyst team at Rask Australia spends months looking at new ASX investments (it’s our day job!). To make your life easier, you can get the name of our team’s top ETF pick for 2022 in a free report. Keep reading to find out how to get our analyst’s report emailed to you right now…
