Here's why the ASX's VanEck Wide Moat ETF had such an awful April

This high-flying ETF was brought closer to Earth last month.

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As most ASX investors would know, April was not a very pleasant month for the Australian share market. Over the month just passed, the S&P/ASX 200 Index (ASX: XJO) dropped by 2.9%, with many ASX 200 blue chips doing even worse. But that's nothing compared to what ASX investors in the VanEck Morningstar Wide Moat ETF (ASX: MOAT) suffered.

MOAT units had a horrid month on the ASX, no way around it. This exchange-traded fund (ETF) began April at $129.81 a unit but finished up at just $125.67. That's a drop worth 3.19%.

To rub salt in the wound, this depressing April performance came after the VanEck Wide Moat ETF hit a new all-time record high just after April began as well. Yep, MOAT units clocked a new record of $131 each right at the start of the month. So it was a rather substantial retreat for this ETF over April.

MOAT investors wouldn't be too used to this kind of return. As we've documented here at the Motley Fool for a while now, this ASX ETF is a habitual high flyer, routinely cranking out double-digit returns every year for its investors.

As of 31 March, this ETF had averaged a return of 17.16% per annum over the past five years (including dividend distributions). That's in addition to an average return of 16.4% per annum since its inception in 2015.

So why did this lucrative ETF have such a dire month over April?

The VanEck Wide Moat ETF stumbles for ASX investors

Well, to answer that, we must first understand what exactly is in this ETF. Like all share-based ETFs, the Wide Moat fund represents an investment in an underlying portfolio of different shares. In this case, it is a concentrated (54 at the last count) portfolio of US stocks that are all selected after being judged to have what is known as a wide 'economic moat'.

A 'moat' is a term first used by legendary investor Warren Buffett. It refers to a company's possession of an intrinsic competitive advantage that acts as a shield against its competition, in a similar manner to how a moat protected a castle in days of yore. Buffett himself has told investors that his investments usually possess some sort of moat.

In the investing world, this moat could be a powerful brand, a cost advantage that competitors can't match, or possessing an asset or product that consumers find difficult not to use.

Some of the Wide Moat ETF's holdings include names like Alphabet, Campbell Soup, Walt Disney, Amazon, Nike, Starbucks, Adobe and Buffett's own Berkshire Hathaway.

It's not hard to see why these companies all conceivably possess 'wide moats'.

But it's these kinds of companies that explain why the Wide Moat ETF has had such a tough month.

To illustrate, the Adobe share price fell 8.28% over April. Amazon stock was down almost 3%, while Disney shares dropped 9.2%. Even Buffett's Berkshire couldn't escape April without a sizeable drop, with its Class A shares losing 5.5% of their value over the month just gone.

So with these kinds of losses widespread amongst the ASX's MOAT ETF, it's no wonder the price of the ETF itself got a whacking last month. Let's see if May can turn things around.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Adobe, Alphabet, Amazon, Berkshire Hathaway, Nike, Starbucks, VanEck Morningstar Wide Moat ETF, and Walt Disney. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe, Alphabet, Amazon, Berkshire Hathaway, Nike, Starbucks, and Walt Disney. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $47.50 calls on Nike. The Motley Fool Australia has recommended Adobe, Alphabet, Amazon, Berkshire Hathaway, Nike, Starbucks, VanEck Morningstar Wide Moat ETF, and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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