One exchange-traded fund (ETF) that is popular with Australian investors is VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT).
With almost $1 billion in net assets, a lot of wealth has been put into this fund.
In fact, that's more than what is invested in Myer Holdings Ltd (ASX: MYR) and Kogan.com Ltd (ASX: KGN).
But has it been a good investment? Let's take a look at what a $20,000 investment five years ago would be worth today.
What is the ASX MOAT ETF?
Firstly, let's take a look at what exactly the VanEck Vectors Morningstar Wide Moat ETF provides investors.
The fund manager, VanEck, describes the ASX MOAT as an ETF that gives "exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar's equity research team."
It then notes that the "wide moat ETF aims to provide investment returns before fees and other costs which track the performance of the Index."
How are the holdings selected?
As it mentions above, this ETF puts together a group of ~54 companies with sustainable competitive advantages that are trading at attractive prices.
These companies will change periodically depending on the status of their competitive advantages or valuation.
VanEck notes that at each quarterly review, current index constituents that are ranked within the top 150% of the eligible universe based on current market price/fair value ratio are given preference for inclusion in the fund.
And from the remaining eligible securities, those with the lowest current market price/fair value ratios are included in the index sector cap.
This has ultimately led to the likes of Google parent Alphabet Inc (NASDAQ: GOOG), automatic test equipment designer Teradyne Inc (NASDAQ: TER), online giant Amazon.com Inc (NASDAQ: AMZN), and Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.B) been included in the fund at present.
Big returns
The good news is that the ASX MOAT ETF's investment focus on sustainable competitive advantages and fair valuations has delivered the goods for investors over the last five years.
In fact, over this period, the ETF has outperformed the market and delivered mouth-watering returns for investors.
Since this time in 2019, the ETF has achieved an average total return of approximately 16.4% per annum.
This means that if you had invested $20,000 into the ASX MOAT ETF five years ago, you would have compounded your way to almost $43,000 today. That's more than double your original investment.
