How the ILC and OZR 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 SPDR OZR ETF invests in resources companies from within the ASX 200 and aims to track the S&P/ASX 200 Resources Index.
See our ASX OZR 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 OZR 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 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 July 2022, the ILC ETF has an MER of 0.24% while the OZR ETF had a yearly fee of 0.34%. As a result, ILC comes out on top. Keep in mind, a more beneficial 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 split 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.
Three-year return?
As Jerry Maguire said, ‘show me the money’. 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 positive return one year just to generate inferior 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 2022, the ILC ETF had an average annual return of 7.00%. During the same time, the OZR ETF returned 9.34%.
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. OZR’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
Don’t forget our free reviews on ASX ILC and ASX OZR.
For us, the ILC ETF ranks fairly better 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…
