The Global X Fang+ ETF (ASX: FANG) is an exciting exchange-traded fund (ETF) that has delivered excellent returns. There are plenty of compelling elements to know about this investment.
It may not be as well-known as some of the other ASX-listed, US-focused ETFs, such as Betashares Nasdaq 100 ETF (ASX: NDQ) and iShares S&P 500 ETF (ASX: IVV), but I think it could be an ETF worth owning.
The FANG ETF tracks an index of some of the largest US tech companies. The ETF was started in February 2020, so it's relatively young compared to some ASX ETFs.
If I were considering the FANG ETF, I'd want to know about the below factors.
Concentrated exposure
Investors who want exposure to the US technology giants can get it in abundance with this ASX ETF.
There are only ten holdings in the portfolio, meaning there isn't much diversification on the surface. As of 7 June 2024, these are the holdings and the weightings:
- Nvidia (12.28%)
- Alphabet (11.66%)
- Apple (10.48%)
- Broadcom (10.27%)
- Netflix (9.81%)
- Tesla (9.68%)
- Amazon.com (9.66%)
- Microsoft (9.43%)
- Meta Platforms (9.19%)
- Snowflake (7.5%)
The holdings are meant to be equally weighted, and the current allocations are just a measure of the share price performance in recent times.
While it may offer little diversification, the strength of this collective group of businesses has been exceptional in the last few years, so it has been beneficial to own them. In the three years to June 2024, the FANG ETF has returned an average of 22% per year. But I wouldn't expect the next three years to be anywhere near as strong.
Great tailwinds
Many of these stocks give exposure to some of the strongest growth themes.
Nvidia, Microsoft and Alphabet offer AI exposure. Alphabet, Apple and Meta Platforms are benefiting from the global growth of smartphone usage. Amazon, Microsoft, and Alphabet are generating good earnings growth in cloud computing. The long-term global shift towards online video is another benefit, which helps Netflix, Alphabet (YouTube) and Apple. And so on.
Several global technological shifts are taking place, and these companies seem to be at the heart of those changes.
Cheaper than the NDQ ETF
One of the most popular ways to gain elevated exposure to US tech giants is the NDQ ETF, which has $4.7 billion of net assets. Betashares Nasdaq 100 ETF has an annual management fee of 0.48%, which is cheaper than what many global active fund managers might charge.
If investors are buying the NDQ ETF for US tech exposure, then the FANG ETF's annual management fee of 0.35% could be more appealing because it is 13 basis points (0.13%) cheaper per year.
Over the three years to 31 May 2024, the NDQ ETF has delivered an average return per annum of 16.6%, which is weaker than the FANG ETF's return of 22% per annum. Of course, past performance (and prior outperformance) can't be relied on for future performance.
