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Quality is just one factor that makes this ETF is a great pick, in my opinion.
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Tristan Harrison
Tristan Harrison is one of the longest-serving writers at The Motley Fool Australia. Tristan has been contributing ASX news and stock analysis articles since 2016. His aim is to help Australians learn about great ASX shares, with a focus on ASX dividend shares and undervalued ASX growth shares. He holds an advanced diploma from the Association of Accounting Technicians and is enrolled in the Chartered Institute Management Accountant (CIMA) qualification program.
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| More on: QLTY
In my books, the Betashares Global Quality Leaders ETF (ASX: QLTY) is an excellent ASX-listed exchange-traded fund (ETF).
There are plenty of ETFs on the ASX to choose from. Many are focused on a certain stock market geography, while others are focused on a particular industry, index or investment theme.
For me, the QLTY ETF ticks my 'desired investment' boxes in ways that most of the others don't. Let's take a look.
True diversification
The QLTY ETF could act as a core position in a portfolio because of its diversification across numerous companies and many countries.
The portfolio comprises 150 global companies outside of Australia, a positive simply because of the vast number of excellent companies and opportunities outside our home market.
Around two-thirds of the ASX ETF's portfolio is invested in US-based companies. Other countries with a weighting over 1% in late March are Japan (11.4%), the Netherlands (4%), France (3.5%), Denmark (2.6%), the UK (2%), Switzerland (1.8%), Canada (1.4%) and Sweden (1.1%).
In terms of industries, I like the mix of the weightings, with the biggest allocation to sectors like IT, industrials and healthcare which may deliver more growth compared to financials, mining or energy.
High-quality bias
The QLTY ETF invests in high-quality businesses, offering exposure to a higher-quality portfolio than the overall global share market.
A business must rank well on four measures to be chosen for this portfolio: return on equity (ROE), debt-to-capital, cash flow generation, and earnings stability. The combined score of those four metrics decides which businesses make it into the ASX ETF's portfolio.
Those metrics are excellent financial measures to judge a business' quality – the good ones can hopefully deliver better profit performance over time and support shareholder returns.
Its largest holdings right now are Alphabet, Microsoft, Meta Platforms, Cisco Systems, Servicenow and Applied Materials.
Low fees and good returns
Fees can play a sizeable part in the overall return of a fund investment, which is partly why options like Vanguard Australian Shares Index ETF (ASX: VAS) and iShares S&P 500 (ASX: IVV) are appealing.
With an annual management fee of 0.35%, the QLTY ETF isn't the lowest fee around, but I think it's reasonable considering how much work has gone into constructing the portfolio.
Past performance is not a guarantee of future performance, particularly in the short term, but the QLTY ETF delivered an average annual return of 15.6% over the five years to 28 March 2024.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Applied Materials, Cisco Systems, Meta Platforms, Microsoft, ServiceNow, and iShares S&P 500 ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Meta Platforms, ServiceNow, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
