One of the many trends that have emerged in the exchange-traded fund (ETF) sector in recent years is the focus on ‘quality’ shares. While this may seem like a no-brainer, the fact remains that most ETFs follow an index that either includes most shares on a stock market, based only on market capitalisation. Or else a bunch of shares that all operate in a similar industry or theme.
But there are far fewer that focus on finding quality companies. One of the only examples on the ASX today is the VanEck MSCI International Quality ETF (ASX: QUAL). This ETF from VanEck focuses on finding companies from around the world that share common “key fundamentals”. These include high return on equity, earnings stability and low financial leverage.
QUAL charges a management fee of 0.4% per annum.
Number of QUALity ETFs on the ASX set to expand…
BetaShares also has a quality-themed ETF. It goes by the name of the BetaShares Global Quality Leaders ETF (ASX: QLTY). This one seems to have less of a focus on tech shares than the QUAL ETF. But it does use very similar stock criteria. These are “return on equity, debt-to-capital, cash flow generation ability and earnings stability”. Some of its current top holdings include Johnson & Johnson (NYSE: JNJ), Pfizer Inc. (NYSE: PFE) and Intel Corporation (NASDAQ: INTC). QLTY charges a management fee of 0.35% per annum.
But we might have to add another one to the list soon, one that covers ASX shares no less.
According to a report in The Australian today, BetaShares is planning on launching a new, ASX-based quality ETF.
The BetaShares Australian Quality ETF is reportedly set to hit the ASX boards next month under the ticker code ‘AQLT’. The provider says that “AQLT will provide cost-effective access to a diversified portfolio of quality Australian companies selected based on high return on equity, low leverage and relative earnings stability”.
It will house a diversified portfolio of 40 companies. The report names Macquarie Group Ltd (ASX: MQG), CSL Limited (ASX: CAL), Woolworths Group Ltd (ASX: WOW) and Wesfarmers Ltd (ASX: WES) as current constituents of the index AQLT is aiming to track.
So investors looking for a simple way to access quality shares on the ASX will soon have a homegrown option to consider as well.