Why investors study the Australian Shares High Yield ETF and Geared Australian Equity Fund (Hedge Fund) ETF
The Vanguard VHY ETF provides exposure to the largest dividend-paying Australian shares, based on market capitalisation and forecast dividend yield. It tracks the FTSE Australian High Dividend Yield Index. The index excludes real estate investment trusts (REITs) and caps the total exposure to any sector/industry at 40%.
BetaShares GEAR Fund is an internally geared fund, investing in the largest 200 companies on the ASX, by market capitalisation.
Want to know (lots) more? Read through our full GEAR ETF review: see our GEAR ETF review now.
Obviously, an easy way to analyse any ETF or fund like GEAR or VHY is with quantitative methods, such as studying the fees and past performance (keeping in mind past performance is no guarantee of future performance).
We’ll keep it basic and just study the fees. Based on our data for December 2021, the VHY ETF has a management expense ratio (MER) of 0.25% while the GEAR ETF’s yearly fee was 0.80%.So VHY 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
Typically, we want to a see ETFs with a three-year track record of compelling performance. Put another way, when an ETF achieves a three year track record, we score it greater 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.
Finally, at Best ETFs Australia, we apply a rating to the ETF issuer or provider. That is, the company that starts and is responsible for operating the ETF on the ASX. There are too many considerations that go into our scoring to detail here. The issuer of VHY is Vanguard. Vanguard ranks highly for our scores of ETF providers and issuers in Australia. We consider Vanguard to be in Australia’s top three ETF providers for retail investors, advisers and institutions. GEAR’s provider 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.
Conclusion
Be sure to visit our free ASX VHY review or ASX GEAR ETF review.
In summary, the VHY ETF rates more promisingly for our internal scoring methodology but not by much compared to GEAR.
Please, keep in mind, there is much more to picking 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…
