Not all exchange traded funds (ETFs) are built the same.
Some simply track broad indices, while others take a more selective approach by focusing on businesses with strong fundamentals.
With that in mind, here are three ASX ETFs that put quality at the centre of their strategy and could be worth considering today.
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VanEck MSCI International Quality ETF (ASX: QUAL)
The first ETF that has gained a strong following is the VanEck MSCI International Quality ETF.
This fund screens global companies based on metrics such as return on equity, earnings stability, and low financial leverage. The result is a portfolio of high-quality businesses with proven track records.
Its holdings include companies like Microsoft (NASDAQ: MSFT), NVIDIA (NASDAQ: NVDA), and Visa (NYSE: V). Microsoft, for example, generates recurring revenue through its cloud platform Azure and its Office software suite, which are deeply embedded in business operations worldwide. This creates a highly predictable earnings stream and strong margins.
By focusing on these types of companies, the ETF aims to provide exposure to global leaders that can compound earnings over time. The team at VanEck recently recommended this fund.
BetaShares Australian Quality ETF (ASX: AQLT)
For investors wanting a local angle, the BetaShares Australian Quality ETF applies a similar philosophy to the Australian market.
Instead of concentrating on just the biggest companies, it selects businesses based on profitability, earnings consistency, and financial strength. This can result in a portfolio that looks quite different from the broader ASX.
Its holdings include companies such as CSL Ltd (ASX: CSL), REA Group Ltd (ASX: REA), and Goodman Group (ASX: GMG). CSL is a good example of a quality business, with a global presence in plasma therapies and vaccines, supported by significant research and development capabilities and strong margins.
This focus on high-quality Australian shares can help investors gain exposure to businesses with more resilient earnings profiles. This fund was recently recommended by analysts at Betashares.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
A final ASX ETF with a quality tilt is the VanEck Morningstar Wide Moat ETF.
Rather than using financial metrics alone, this fund looks for companies with sustainable competitive advantages, or economic moats. These are businesses that can protect their market position and profitability over long periods.
Its holdings include companies like Airbnb (NASDAQ: ABNB), Boeing (NYSE: BA), and Nike (NYSE: NKE). Airbnb, for instance, dominates the short-term stays market with an accommodation network stretching across the globe.
The ETF also incorporates valuation into its process, aiming to invest in these high-quality companies when they are attractively priced.
By combining competitive advantages with valuation discipline, it offers a slightly different take on quality investing.
