The largest exchange-traded fund (ETF) position in my portfolio is so good that I'm planning to buy more.
The fund I'm referring to is the VanEck MSCI International Quality ETF (ASX: QUAL).
It's a fund I regularly like to talk about because of all the excellent characteristics it has. Let's get into the pleasing elements of it.
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Quality focused
There are plenty of great businesses on the global stock market, but there are also lots of average ones (at best).
So, why not just own the great ones? It's hard to decide what exactly defines a great business, so the QUAL ETF is looking for businesses that rank well on multiple quality metrics.
There are three fundamentals this ASX ETF looks for.
First, a high return on equity (ROE). That means the business makes a high level of profit for how much shareholder money is retained within it.
Second, the business should have earnings stability. That means the business usually doesn't see profit go backwards. Therefore, in most years, the profit goes up, which is an excellent tailwind for the share price.
Third, the business should have low financial leverage. In other words, they have a small amount of debt for their size.
Businesses that tick all three of these boxes are high-quality, in my view.
The ASX ETF is diversified
It's understandable for some investors to think this portfolio is full of US tech companies. But I'd say it is more diversified than that.
It currently has a portfolio of approximately 300 names, which I believe is an excellent level of diversification.
The businesses come from various locations, including the US, Switzerland, the UK, Japan, the Netherlands, Denmark, France, Germany, Canada, Sweden, Ireland, Italy, China, and Spain.
Pleasingly, there are six sectors with a double-digit weighting, which is very good diversification.
Low management fees
For how much research has been put into selecting companies for this portfolio, I think the fees are very reasonable.
It has an annual management fee of 0.40%, whereas many global fund managers may charge at least 1% per annum. Plus, the ASX ETF doesn't charge performance fees.
The lower the fees, the stronger the net returns for investors.
Strong returns
Ultimately, investing is about achieving good returns.
This ASX ETF has been one of the best performers on the ASX over the long term.
Of course, past performance is not a guarantee of future returns. Over the past ten years to 31 May 2025, it has delivered an average return per year of 14.1%.
Time will tell how strongly this fund can perform, but I think there's a good chance it can outperform the S&P/ASX 200 Index (ASX: XJO) in the long term.
