ASX exchange-traded funds (ETFs) holding international shares vastly outperformed those invested in ASX shares in FY26.
The best performing ASX ETF holding global stocks delivered a 171% total return in FY26.
This compares with the best performing Aussie-stock-based ETF, which returned an excellent, but still vastly inferior, 51%.
Of course, that doesn't mean we shouldn't invest in ASX shares.
In some years, the ASX will outperform. In others, global stocks — particularly the US markets in recent years — will outperform.
But the FY26 disparity in performance does show the value of diversification in our share portfolios.
Thankfully, ASX ETFs allow us to easily invest in overseas stocks via our local exchange.
Diversification, convenience, and low costs are among the reasons why Aussies have ploughed $372 billion into ETFs over the years.
The providers are responding to the ongoing increase in demand by launching new products.
A record 72 new ASX ETFs began trading in FY26, and there are now 458 in total to choose from.
Image source: Getty Images
ASX ETFs that produced triple-digit returns in FY26
Full-year data released by the Australian Securities Exchange shows only three ASX ETFs provided triple-digit returns last financial year.
Let's find out more about them.
iShares MSCI South Korea AUD ETF (ASX: IKO)
The IKO ETF delivered a sensational one-year total return of 171%. The historical distribution yield is 4.6%.
This month, IKO ETF paid the biggest dollar-value dividend of all of BlackRock's iShares ETFs at $13.98 per unit.
IKO ETF seeks to mirror the tech-heavy MSCI Korea 25/50 Index, providing exposure to Korean large caps and mid caps.
The top two holdings are memory chip manufacturer SK HYNIX INC (27%) and consumer electronics and semiconductor manufacturer Samsung Electronics (23%).
This ASX ETF's success in FY26 is directly linked to the massive artificial intelligence (AI) investment thematic.
In BlackRock's mid-year review, Helen Jewell, International Chief Investment Officer for Fundamental Equities, said the US may dominate AI investment, but there are "real opportunities to invest in mega force value chains and find diversification elsewhere".
Jewell said countries like South Korea "have become proxies for the AI mega force", but warns that geographic diversification in our portfolios does not protect against concentration risk when multiple markets are tied to the same value chain.
She explains:
Investors should watch country-level concentration risk.
Case in point: Taiwan and South Korea equities are plays on the chips value chain, with equity markets that are large relative to GDP and heavily exposed to a handful of AI-linked companies.
IKO ETF demonstrates this risk.
While it holds 82 stocks representative of the South Korean market, the top two represent 50% of the fund's total investment.
Additionally, more than 50% of those 82 companies are in the technology sector.
Global X Semiconductor ETF (ASX: SEMI)
The SEMI ETF produced an astounding one-year total return of 161%. The historical distribution yield is 6.2%.
Like IKO, SEMI is also directly linked to the AI thematic.
Semiconductors, which control electrical currents in computer chips, are essential for AI and are present in many everyday devices like smartphones.
SEMI ETF's top holdings are Micron Technology (12%), which designs and manufactures memory and storage chips; Advanced Micro Devices (10%), which designs processors and graphics chips; Taiwan Semiconductor Manufacturing Company (8%), the world's leading contract manufacturer of semiconductor chips; and Nvidia (8%), which designs graphics processors and AI chips.
Global X says Aussie investors need to go outside the local bourse to access the AI investment thematic.
In an article, Global X said:
This year, share markets in the United States, Japan, South Korea and Taiwan have delivered strong gains as investors pour money into companies building the technology that powers AI.
Computer chip manufacturers, data centre operators and technology firms have become some of the world's most valuable businesses as demand for AI continues to surge.
Australia's share market looks very different.
The ASX is dominated by banks, miners and mature dividend-paying companies. These businesses remain important and can play a valuable role in a portfolio, but they generally have less direct exposure to the AI boom than many of their overseas counterparts.
As a result, investors who focus exclusively on Australian shares may be missing out on one of the most significant growth opportunities in global markets.
Global X Hydrogen AUD ETF (ASX: HGEN)
The HGEN ETF produced an outstanding total one-year return of 135% in FY26. The historical distribution yield is 0.7%.
HGEN invests in companies within the global hydrogen industry.
Hydrogen is expected to play a key role in the global green energy transition.
Global X explains the ASX ETF's thesis:
The global demand for hydrogen is expected to nearly double between 2021 and 2030.
Hydrogen-powered fuel cells produce zero direct emissions, meaning broader adoption could result in reduced greenhouse gas emissions and improved air quality.
The shift to green energy isn't confined to a single sector or region. HGEN invests accordingly, with global exposure across multiple industries.
This includes companies involved in hydrogen production; the integration of hydrogen into energy systems; and the development/manufacturing of hydrogen fuel cells, electrolysers, and other technologies related to the utilisation of hydrogen as an energy source.
The top holding is Bloom Energy (15%), a US company that designs and manufactures solid oxide fuel cells that produce on-site electricity for power generation in data centres, manufacturing, and other commercial sectors.
The next two top holdings are Kaori Heat Treatment Co (9%), a Taiwanese company that manufactures heat exchangers and thermal management systems; and Plug Power (8%), a US company that develops hydrogen fuel cell systems, electrolysers, and hydrogen infrastructure for industrial and transport applications.
