Investment company Stockspot has just released its 2020 ETF research report, revealing the best and worst-performing ASX exchange-traded funds (ETFs) and providing insight into this increasingly popular investment option. 

The report found that the Australian ETF market grew by 24% over the 12 months to March 2020, with ETF funds under management (FUM) increasing from $45.8 billion to $56.9 billion.

Over the last year, 23 new ETFs were introduced to the market, taking the total number of ETFs in Australia to 212.

Investors turn to ETFs amid heightened uncertainty

The report revealed that ETF trading volumes in March 2020 set an all-time record that was almost triple the previous monthly record. As the ASX entered a bear market, there were nearly 800,000 ETF trades in March. That’s 8 times the historical average of 110,000 monthly trades.

According to the report, the market sell-off welcomed consistent inflows to Australian-focused ETFs and those focused on other parts of the world, while active ETFs experienced significant outflows. This reflects the greater importance investors place on transparency and liquidity in times of volatility.

Best-performing ASX ETFs

Commodities were front and centre in the report’s best performers for the 12 months to March 2020, with the ASX gold sector performing strongly. ETF Securities’ ETFS Physical Gold ETF (ASX: GOLD) posted a 43.1% return. Hot on its heels was Perth Mint Gold (ASX: PMGOLD), which saw a 1-year return of 42.9%.

This reflects the safe-haven status of gold, with investors flocking to the precious metal on the back of increasing COVID-19 uncertainty and record-low interest rates. Notably, the report also found that there is now $2.3 billion in physical gold ETFs listed on the ASX, more than double last year’s figure of $906 million.

According to the report, physical gold outperformed ASX gold mining companies, which delivered a return of 23%.

Worst-performing ASX ETFs

The dreaded pole position belonged to the BetaShares Crude Oil Index ETF (ASX: OOO), racking up a negative return of 64.6%. This is a synthetic ETF that aims to provide investors with exposure to WTI crude oil futures, which have been on a downward spiral and crashed into negative territory at the back-end of last month.

In second place was the BetaShares Global Energy Companies ETF (ASX: FUEL) which experienced a 46.7% fall. Since most major energy companies are largely exposed to crude oil prices, this ETF suffered a similar fate to OOO.

Most popular ASX ETFs

The Vanguard Australian Shares Index ETF (ASX: VAS) retained its crown as the largest ASX ETF and was the most popular choice for investors in terms of net flows. In the 12 months to March 2020, the VAS ETF experienced $1.6 billion of inflows. According to Vanguard, VAS now manages $4.8 billion of ETF funds as of 30 April 2020.

The second most popular choice for investors was another broad-based Australian share market ETF, iShares Core S&P/ASX 200 ETF (ASX: IOZ). IOZ enjoyed $871 million in new money coming in.

Perhaps unsurprisingly, gold also featured, with the ETF Securities GOLD ETF experiencing the third-highest inflows of $629 million.

If you’re interested in investing in ETFs, be sure to check out the Fool’s top ETFs for 2020. And if shares are also up your alley, don’t miss the report below.

More reading

• Buffett? Lynch? Here are the investing experts you should take advice from when buying ASX shares
• Should ASX investors just buy ETF index funds for better returns?
• Don’t delay: Start investing today in shares to become rich
• Here’s how to create a $1 million ASX portfolio by investing $1,000 a month
• Why a buy and hold strategy for ASX shares is best

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Commonwealth Bank of Australia (ASX: CBA) may emerge from the coronavirus pandemic as the best bank to invest in among its Big 4 cohorts: Australia and New Zealand Banking Group Limited (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB).

Could it be the big four bank to buy? 

No deferred dividend or capital raising 

CBA’s strong capital position enabled the bank to deliver 1H20 interim dividend of $2.00 per share or $3.5 billion to its ~830,000 shareholders. A much-needed cash benefit to the economy. 

Comparing this to the likes of Westpac and ANZ, which both deferred their interim dividend, and NAB, which offered its existing shareholders more capital in its $3.5 billion capital raising yet still opted to pay them a small interim dividend. 

Despite paying $3.5 million in dividends, Commonwealth Bank was still able to maintain a March CET1 (Common Equity Tier 1) ratio of 10.7% above APRA’s ‘unquestionably strong’ benchmark of 10.5%, notwithstanding the timing of the 1H20 dividend payment and additional COVID-19 and remediation provisions. 

I believe Commonwealth Bank’s commitment to paying a dividend in today’s uncertain climate – without having to raise additional capital, while also meeting APRA’s stringent capital requirements – is a reflection of its position as the leading big four bank. 

Sturdy relative earnings

Commonwealth Bank demonstrated relatively sturdy earnings compared to its peers. Cash net profit after tax for the big four banks in comparison to 1H19 was:

• CBA down 44% 
• Westpac down 70%
• NAB down 51.4%
• ANZ down 60%

Commonwealth Bank is well placed to manage the challenging market conditions, with strong balance sheet settings and a favourable business mix. The group is 70% deposit funded, underpinned by the bank’s peer lending franchise strength in stable household deposits. Deposit balances grew strongly in Q3, influenced by growth in retail/SME deposits and corporate clients drawing down on funding lines and placing these funds into CBA deposits for liquidity purposes. 

Is it a buy?

There are a number of risks and scenarios that could play out following COVID-19. Commonwealth Bank’s report outlines key drivers in the housing market including unemployment, underemployment, changes to income and house prices.

Government assistance programs such as the JobKeeper scheme have been able to prop up the economy and employment levels. However, the implicit end of JobKeeper combined with structural changes in Australian sectors and ongoing China trade tensions could see economic conditions worsen. Despite a potentially weaker economic outlook, I would still consider Commonwealth Bank the better of the big four banks, given its earnings and commitment to dividends. 

More reading

• Are NAB shares a bargain buy?
• ASX 200 down 0.2%: Big four banks lower and TPG announces demerger plans
• Are ASX bank shares worth buying despite dividend cuts?
• Is it time to buy ASX banks?
• Are CBA shares in the buy zone?

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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