There are some really good exchange-traded funds (ETFs) that investors can buy on the ASX.
Some ETFs haven't been able to generate much returns in recent times. But others have done very well and could continue to do well because of the underlying portfolio:
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
This is an ETF that is all about giving investors exposure to businesses with sustainable competitive advantages. Or, in Warren Buffett's words, it's about finding businesses with wide economic moats. That means it's hard for competitors to cross that 'moat' and challenge the business.
The Morningstar equity research team look for these quality US companies that can pass the equity research process.
Those shares also have to be trading at attractive prices, relative to Morningstar's estimate of fair value, before the ETF would buy them.
It's a reasonably cheap management cost of 0.49% per annum, which means a good chunk of the returns stay in the hands of the investor.
VanEck Vectors Morningstar Wide Moat ETF aims to have at least 40 holdings. At the moment it has 49. At the end of March 2021, some of its largest holdings included Wells Fargo, Intel, Altria, General Dynamics, Blackbaud, Boeing, Cheniere Energy and Biogen.
Over the last five years, the return of the ETF has been an average of 19.3% per annum. That is around 3.5% per annum better than the S&P 500, which is a fair benchmark considering all of this ETF's holdings are US-listed. But plenty of those companies have global earnings.
VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)
This ETF idea is more concentrated on a single theme. That theme is video gaming and e-sports, if you didn't catch that from the name of it.
The competitive video gaming audience is expected to reach 646 million people globally by 2023 according to the Newzoo Global Exports Market Report, partly because of the rising number of people using the internet.
E-sports revenue growth has increased an average of 28% per annum since 2015. Video gaming has seen 12% average annual growth since 2015.
VanEck explains that the ETF has a number of different exposures including video game and related hardware and software developers, streaming services, companies involved in e-sports events and so on.
To be included in the ETF, at least 50% of the revenue must be from video gaming or e-sports.
There are 25 holdings in total, including Nvidia, Tencent, Advanced Micro Devices, Sea, Nintendo, Activision Blizzard, Netease, Take Two Interative Software, Nexon and Electronic Arts.
This ETF is more diversified than the first one I mentioned, geographically speaking. The countries with more than a 5% weighting include: the US (38.5%), Japan (21.1%), China (18.4%), Singapore (6.6%) and South Korea (5.3%).
VanEck Vectors Video Gaming and eSports ETF's management fee is a little more expensive at 0.55% per annum. But the returns of the benchmark index have been really good – 30.9% per annum over the last three years.
