The BetaShares Geared Australian Equity Fund (Hedge Fund) ETF (ASX: GEAR) and Vaneck Australian Equal Weight ETF (ASX: MVW) are exchange-traded funds (ETFs) operating in the Australian shares sector, and aiming to make investing as simple as possible.
How the GEAR and MVW ETFs fit in a portfolio
BetaShares GEAR Fund is an internally geared fund, investing in the largest 200 companies on the ASX, by market capitalisation.
The VanEck MVW ETF provides exposure to over 60 of the largest and most liquid Australian shares, equally weighted. By equally weighting shares, this ETF aims to reduce concentration risk in specific Australian stocks and sectors.
See our ASX MVW 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 MVW and GEAR is to study the fee load. No one likes paying high fees if they don’t need to. Here at Best ETFs and Rask Australia, 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 December 2021, the GEAR ETF has an MER of 0.80% while the MVW ETF had a yearly fee of 0.35%. So, MVW wins on this metric. Keep in mind, a more useful 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 classify 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.
How we study past performance
Typically, we want to a see ETFs with a three-year track record of attractive performance. Put another way, when an ETF achieves a three year track record, we score it in a better position than might otherwise be the case. That said, there are exceptions to this rule of thumb. Also, remember that it’s hard to compare an ETF with a hedge fund strategy against other ETFs. Why? Hedge fund ETFs often use inverse or ‘opposite’ strategies which means that they’re designed to move in an opposite direction to the market. Nevertheless, we can see that both ETFs met their three-year performance milestone.
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 GEAR ETF is BetaShares. And 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. MVW’s ETF provider on the ASX is Vaneck. VanEck ranks highly for our scores of ETF providers and issuers in Australia. Our team considers VanEck to be one of Australia’s leading providers of specialised ETFs and funds for retail investors and advisers.
What it all means
If you’d like to learn more about these two ETFs, be sure to visit our free GEAR ETF report or MVW ETF review.
In summary, the MVW ETF ranks higher against our internal scoring methodology but not by much compared to GEAR.
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 2022, keep reading…
