Are Tech ETFs on ASX worth a watch?

Summary

• Amid COVID-19 pandemic, technology sector has been experiencing strong tailwinds and outperforming the benchmark index ASX200. Likewise, the technology sector ETFs are also witnessing boosted performance, consistent with their respective indices.
• Technology ETFs are noted to provide low risk and low-cost exposure to a diverse range of technology entities.
• ETFs can be traded like any other stock in the market, and they also pay semi-annual or annual distributions to the holders.

Exchange traded funds (ETFs) are believed to be one of the magnificent investment vehicles to accomplish the investment goals of an investor. ETFs are akin to index mutual funds, but they trade like stocks. Furthermore, ETFs’ popularity has skyrocketed over the last few years with low risk and low-cost access to almost every corner of the market to the investor.

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ETFs primarily follow the performance of a given index and generate a return on that index and are contingent on management fees and expenses. ETFs offer numerous benefits such as rich liquidity, the extensive choice for making an investment, low fees, diversification across assets, low expense ratio and many more.

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Furthermore, amid COVID-19, the technology space has taken leaps, as the adoption of new technologies has soared, and digitisation has accelerated, explicitly, in technology-enabled segments such as connectivity, data centres, cloud computing, retail, supply chain and many more.

Numerous ASX listed technology players are also outperforming benchmarks and hitting record highs. This can be exemplified by the launch of S&P/ASX All Technology Index (ASX:XTX) in February 2020. Notably, the index was launched to promote technology sector players in Australia. On 27 August 2020, XTX closed the day’s trade at 2,517, reflecting a marginal rise of 0.21 per cent from its previous close.

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In the wake of rising tech index, numerous technology sector ETFs are booming, generating impressive returns.

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In a nutshell, they are worth watching on ASX.

With this backdrop, let us quickly skim through few ASX-listed ETFs.

BetaShares Asia Technology Tigers ETF (ASX:ASIA)

ASIA seeks to track the performance of Solactive Asia Ex-Japan Technology & Internet Tigers Index (before fees and expenses), consisting of Asia’s (excluding Japan) fifty largest online retail and technology stocks.

The fund provides access to the high-growth Asian technology sector, which is anticipated to keep up with the growth momentum. Notably, the fund charges an annual management fee of 0.57 per cent and expenses (estimated) of 0.10 per cent per annum.

As of 31 July 2020, China was the most allocated country with 54.4 per cent share, followed by other countries mentioned below.

• Taiwan:22.7%
• South Korea:16.5%
• India:5.9%
• Hong Kong:0.3%
• Other:0.3%

Furthermore, as of 26 August 2020, the largest allocations in the fund were;

Source: BetaShares website

On 27 August 2020, ASIA closed the day’s trade at AU$10.00, noting a surge of 1.112 per cent.

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ETFS FANG+ ETF (ASX:FANG)

ETFS FANG+ ETF tracks the performance of NYSE® FANG+™ Index before fees and expenses. It has stocks from numerous industry verticals such as technology, consumer discretionary, and companies that are highly tech-enabled.

Noteworthy, FANG includes players such as Google or Alphabet, Netflix, Facebook, Amazon, and many more.

Furthermore, FANG is rebalanced quarterly and is equally weighted throughout all the entities. Additionally, for investors, FANG provides simple and low-cost access to leading global innovation leaders, in addition to exposure to megatrend themes like electric vehicles (EV) and digitisation.

As of 27 August 2020, the sector fund allocation was noted at 43.8 per cent to communication services, followed by consumer discretionary at 35.3 per cent and information technology at 21.0 per cent.

On country basis (as on 27 August), the exposure was dedicated as follows:

Source: ETF Securities Australia website

Some of the top constituents of the fund (as of 27 August) include:

• Tesla:15.9%
• Apple:10.7%
• Nvidia Corporation:10.2%
• Alibaba Group:9.8%
• com:9.5%
• Facebook:9.4%
• Twitter:9.1%
• Netflix:9%
• Alphabet:8.6%
• Baidu:7.7%

Established in February 2020, ETFS possess a semi-annual distribution frequency.

Notably, ETFS charges a management fee of 0.35 per cent per annum. Also, ETFS paid a distribution of AU$0.11 per unit on 15 July 2020.

On 27 August 2020, FANG closed the day’s trade at AU$15.150, up by 2.782 per cent from its previous close.

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BetaShares S&P/ASX Australian Technology ETF (ASX:ATEC)

ATEC seeks to match the performance of the S&P/ASX All Technology Index before fees and expenses. The fund administers exposure to the entities listed on the Australian stock exchange ranging from information technology, medical technology, online retail, consumer electronics, and many other tech-related market verticals.

Notably, ATEC extends a cost-effective (no active manager fees involved) exposure to leading Australian tech companies at one place and furnishes diversification with a heavy weighting large-cap financials and resource stocks in the portfolio. The fund distributes income annually, charges an annual management fee of 0.48 per cent.

Furthermore, ATEC paid a distribution of AU$0.27 in July.

As of 26 August 2020, the largest allocations in the fund were as follows;

Source: BetaShares website

On 27 August 2020, ATEC closed the day’s trade at AU$20.120, up by 0.299 per cent compared to its last close.