There are several Asian exchange-traded funds (ETFs) on the ASX, which is the best one? I think it’s important to get some geographical diversification with your portfolio.
Many Australian investors have all the domestic exposure they need. The most popular ETFs will give you exposure to most of the globe to places like North America and Europe through options like iShares S&P 500 ETF (ASX: IVV) and Vanguard MSCI Index International Shares ETF (ASX: VGS).
However, Asia is underrepresented considering how big the economies are. I think it would be a mistake to miss out on Asia, as that region as a whole is growing earnings at a much faster pace than a lot of ASX businesses.
Here are three options to consider:
Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE)
It’s a good start to know you’re with low-cost leader Vanguard. Its annual management fee is currently 0.40%.
This ETF gives us exposure to 850 businesses, which are spread across China, Hong Kong, Taiwan, India, Singapore, Thailand, Malaysia, Indonesia, Philippines and Pakistan.
Its top holdings include Samsung, Tencent, Alibaba, Taiwan Superconductor and Baidu. Its holdings also include other industries like banks, insurance, telcos and so on.
This ETF is the most diverse of the three, I think it gives the best diversification.
BetaShares Asia Technology Tigers ETF (ASX: ASIA)
This is a specialised ETF that gives exposure to just the 50 largest technology businesses listed in Asia, outside of Japan. Its annual management fee is currently 0.67%.
It gives us access to the same technology shares as the Vanguard one like Baidu, Alibaba and Tencent, but with much larger allocations. For example, Alibaba currently makes up 9.9% of the ETF and Tencent is 8.5% of the ETF.
If you believe that technology businesses are the best to own and you want to avoid the other industries, then this could be a better choice.
UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP)
This ETF gives us exposure to the 50 largest businesses listed in Asia outside Japan, its annual management fee is 0.45%.
Detractors of capitalism likes that say that power and wealth continually go to the biggest and most powerful. This ETF gives us exposure to only the biggest tech businesses, the biggest banks, the biggest telcos and so on.
Smaller businesses have a good chance of generating more growth for our portfolios, so I’m comfortable saying the UBS ETF is third on my list because of that reason.
The other two are very close in my mind – the BetaShares technology one may be able to provide bigger returns because technology is changing the world, but the Vanguard one ticks off more of the general diversification rules.