Do Australia’s most popular ETFs live up to the hype?

Have you ever wondered what the most popular ETFs in Australia are? The answer might surprise you. While many might assume that ETFs covering exciting themes - like technology - would be the top-hitters, the reality is a bit less sexy. Think vanilla broad-based indices, with Australian and US shares, typically as top of the pops.

The largest ETFs by funds under management includes:

• Vanguard Australian Shares Index ETF (ASX: VAS) - $18.18bn
• Vanguard MSCI Index International Shares ETF (ASX: VGS) - $10.42bn
• iShares S&P 500 ETF (ASX: IVV) - $10.31bn
• Magellan Global Fund Open Class Units Active ETF (ASX: MGOC) - $7.34bn
• VanEck MSCI International Quality ETF (ASX: QUAL) - $6.84bn

The above data has been taken from the ASX Investment Product Summary March 2025. (N.B., the conversion of the Magellan Global Fund from a closed and unlisted managed fund to an active ETF in 2020 saw it bring $13.5bn of funds under management into the industry and was, at one point, the largest ETF in the industry.)

These funds typically garner the biggest net flows across the year and on a monthly basis too – but do they live up to the hype?

“ETF flows continue to reflect a clear investor preference for simplicity, broad market exposure and low fees.”
Global X Australian ETF Market Scoop March 2025.

In this wire, I’ll take a look at which funds generated the biggest net flows in March based on the following categories: Australian shares, international shares, fixed income and cash, and alternatives. I’ll consider their performance on a three-year basis and also investigate the top performing ETF in general for each category.

Australian shares

Source: ASX Investment Product Summary March 2025.

The Vanguard Australian Shares Index ETF was not necessarily the top performer, though it does track in line with its index, the S&P/ASX 200. The top performer of those who generated the biggest net flows was the Vanguard Australian Shares High Yield ETF with 9.17%.

Let's take a step back though - ignoring net flows, you’ll find the top performer is the SPDR S&P/ASX 200 Financials ex AREIT ETF (ASX: OZF) which had 3-year returns of 13.30%.

This shouldn’t come as a surprise - Commonwealth Bank (ASX: CBA) is 33.13% of its holdings and we all know how that has performed in recent years. By contrast, CBA is 10.40% of VAS, with Financials representing a 33.1% sector allocation in total. I would venture that it is no revelation that the more diversified option outranks the pure sector exposure, in terms of both popularity and overall fund size – investors still have the financials exposure but spread their risks more into other sectors.

International shares

Source: ASX Investment Product Summary March 2025.

The last few years (ignoring the last few weeks) have been a stellar time to be in international equities – especially US big tech. Of the above, Vanguard MSCI Index International Shares ETF has generated the biggest flows and the best returns at 13.45%.

Though it broadly covers international shares, just shy of three-quarters of the ETF is invested in US shares. Just above a quarter of the ETF is allocated to information technology stocks, and if you look through the top holdings, you’ll find the Magnificent Seven feature in the top 10 holdings. The largest holding is Apple (NASDAQ: AAPL) at 5.14% of the portfolio.

While Aussie banks dominated the domestic front, homing in on big US tech was the key to success in international markets. This is why thematic ETFs dominated the top performers, particularly tech thematics. Global X Fang+ ETF (ASX: FANG) returned 25.55% on a three-year basis, with the next top the VanEck Video Gaming and Esports ETF (ASX: ESPO) with 20.99%.

Fixed income and cash

Source: ASX Investment Product Summary March 2025.

The iShares Global Aggregate Bond ESG (AUD Hedged) ETF generated the biggest flows. It was listed in late 2022 so doesn’t have three-year performance yet, though its one-year performance is 3.48% and return since inception is 0.70% pa.

The top performer of the most popular fixed income ETFs was the VanEck Australian Subordinated Debt ETF with 5.43% three-year returns. When you consider the most popular Australian equities ETF generated 6.64%, it’s a solid result with attractive risk metrics in comparison. 

The best performing fixed income ETF was the VanEck Emerging Income Opportunities Active ETF (Managed Fund) (ASX: EBND) with 7.10% three-year returns annualised. It invests in bonds and currencies in emerging markets. Such markets typically pay higher interest compared to developed market bonds.

Alternatives (including commodities, currencies, geared products, etc..)

Source: ASX Investment Product Summary March 2025.

Gold has been on an exceptional spree in recent years, as investors moved to safe haven assets and, unsurprisingly, has been popular with investors. The top performer of the most popular ETFs was Perth Mint Gold with 24.32% returns annualised on a three-year basis,  closely followed by Global X Physical Gold in general for the category.

Alternatives is a broad space so it’s also worth looking at other forms of alternatives too, like hedge funds and private markets.

The top performing hedge fund was the Betashares Strong US Dollar Fund (Hedge fund) (ASX: YANK) which delivered 18.09% annualised over three years, while the top-performing private equity fund was the VanEck Global Listed Private Equity ETF (ASX: GPEQ) with 16.26% annualised three year returns.

Living up to the hype

If we come to answer the question whether the most popular ETFs live up to the hype, what is abundantly clear is that the popularity is not necessarily based purely on chasing the highest returns – though that has been a benefit in some instances.

The popularity comes down to more than that: diversification, low fees, convenience, exposure. Arguably then, the most popular ETFs do live up to their hype and it’s testament to the Australian public that these aren’t high risk exposures looking for quick returns but rather reflect a measured approach to finance.

Which ETFs live up best to market hype in your opinion? Let me know in the comments.