This week, we already covered the newest ASX ETF from Betashares. Another new fund is joining the party.
Global X announced the newest fund – The Global X S&P Australia GARP ETF.
It will operate under the ticker ASX:GRPA.
Now, first things first. It's important not to confuse this fund with the already available Global X S&P World Ex Australia Garp ETF (ASX: GARP).
Essentially, this fund has a similar strategy, but instead is focused on Australian holdings rather than international.
What is GARP?
Growth at a Reasonable Price (GARP) is an investment strategy that blends the strengths of growth and value investing in a disciplined, rules-based way, and one that has resonated strongly with Australian investors.
According to Global X, GRPA brings the globally proven GARP approach to Australia to provide a smarter approach to domestic equity allocation.
The investment strategy balances earnings and sales growth with valuation discipline and quality filters, a methodology that enables investors to blend the best of both worlds without having to decide between growth or value alone or deal with active factor rotation.
By applying the GARP framework to the Australian market, investors have the potential to outperform the broader Australian share market, with the underlying index strategy outperforming the broader market ~98% of the time in rolling 10-year period horizons.
What makes up this new ASX ETF?
According to the ETF provider, the S&P/ASX 200 GARP Index is designed to provide investors with exposure to Australian companies with strong earnings growth, solid financial strength, and trading at reasonable valuations.
This involves using factors to filter companies based on:
- Growth – 3-year sales per share growth and earnings per share growth
- Value – earnings to price ratio (i.e. another way of calculating the price to earnings [PE] ratio)
- Quality – financial leverage (i.e. debt levels) and return on equity (ROE)
By sector, its largest exposure is to:
- Materials (29.8%)
- Consumer Discretionary (18.3%)
- Industrials (14.7%)
- Energy (11.6%)
By company:
- BHP Group Ltd (ASX: BHP) (10.4%)
- Wesfarmers Ltd (ASX: WES) (9.3%)
- Woodside Energy Group Ltd (ASX: WDS) (7.6%)
- Rio Tinto Ltd (ASX: RIO) (6.9)
- Qantas Airways Ltd (ASX: QAN) (5.9%)
It comes with a management fee of 0.25%.
Foolish Takeaway
Having covered a few of the new ASX ETFs to join the market over the last 6-12 months, I think there is a common trend.
ASX providers and perhaps investors are no longer satisfied with ASX ETFs that simply track an index like the S&P/ASX 200 Index (ASX: XJO) or S&P 500 Index (SP: .INX).
It seems the newer funds are taking these benchmarks and using more complex strategies to offer returns that can beat these indexes.
However, it's worth noting these more actively managed funds can come with higher fees (which makes sense).
