The Betashares S&P/ASX Australian Technology ETF (ASX: ATEC) is one of the most recent additions to the Rask Invest portfolios. Let’s take a look under the hood at this high-flying ETF.
ATEC ETF – the basics
The Betashares S&P/ASX Australian Technology ETF (ASX: ATEC) aims to track the performance of the S&P/ASX All Technology Index.
It’s a relatively concentrated ETF, but the 42 holdings include companies spanning medical tech, accounting software, advertising platforms, real estate tech, and more.
All of the biggest tech names on the ASX are there, like Wisetech Global Ltd (ASX: WTC), Xero Ltd (ASX: XRO), and Seek Ltd (ASX: SEK).
It’s long been a popular ASX ETF, with net assets over $380 million and a track record of just over 5 years.
And it’s quite the track record.
Of the 39 Betashares ETFs with a track record of at least 5 years, ATEC ranks in the top 10 for returns, averaging just over 15% per year.
Why investors love Aussie tech
Many investors love tech companies for a few key reasons.
- Global reach – tech companies cross borders much more easily than those selling physical goods. This increases the pool of potential customers and creates long growth runways.
- Great margins – most tech companies have enviable gross margins. This means their cost of goods/services is only a small portion of their revenue. While many of the big tech names in the US are young, loss-making companies, a lot of Aussie tech is past this early growth stage. And once these tech companies turn a profit, they tend to be very profitable, with margins commonly north of 80-90%!
- Return drivers – historically, the global reach and strong margins of tech companies has paid off for investors. Over the last 5 years, while the ASX 200 has returned 7.5% per year, the S&P/ASX 200 Info Tech index has returned 13.25% per year. Compounded over a few years, that makes a huge difference.
Why not just invest in the ASX 200?
Many of the companies in the ATEC ETF are also part of the ASX 200, so you may rightly ask, ‘Why not just invest in the ASX 200 and get decent returns with more diversification?’.
The simple answer would be, tech companies are an exceedingly small portion of the ASX 200 – less than 3.5% of the total market cap.
Despite tech companies being the fastest-growing sector on the ASX, we just don’t have that many tech companies.
The US is a whole different ball game. The S&P 500 is absolutely dominated by the US tech giants. They make up more than 30% of the index!
So, if you’re investing in the US, tech is already a big driver of your returns.
However, if you’re invested in the ASX 200, your returns are primarily driven by banks and mining companies.
So, how does ATEC fit into the Rask Invest portfolios? It sits alongside the likes of the iShares S&P 500 ETF (ASX: IVV) and the Vanguard Australian Shares Index ETF (ASX: VAS) as a way of boosting exposure to a high-growth industry that is otherwise heavily diluted in VAS and other ASX 200/300 ETFs.
If you want to learn more, you can check out the Rask Invest portfolios here.
