8 ETFs with the tick of approval from advisers for FY26

Andrew Wielandt: So Anna, my favourite type of ice cream is vanilla. I'm beige, I'm boring.

Adam Dawes: About to say, this jacket’s pretty out there for you!

Andrew Wielandt: I didn’t bring my Richie Benaud jacket today - two for 22. But the Vanguard VHY Income ETF (ASX: VHY) is the one that our clients like, and we like as well. About $5 billion funds under management, very low MER at about 25 basis points. They have 75 names in there - it’s all the ones you’d expect. Commonwealth Bank - albeit CBA is only about 9%, which is interesting relative to the index. It’s got some BHP - though BHP just cut their dividend by 26%, which isn’t helpful. And they’ve also got NAB in there as well.

It’s up about 15% for the last five years, with a 4.6% dividend yield included in that 15% number I just gave you (that’s total return). So if you’re looking for steady, boring income, pays quarterly, all those big names, very sharp MER - pretty hard to go past Vanguard.

Anna Dadic: Adam, VHY is a staple in many portfolios, but it’s focused only on Australian shares. Is there something you like with perhaps a more international flavour?

Adam Dawes: Well, this is far from vanilla ice cream. This one is the Neapolitan! Everything inside of it. It’s the JP Morgan Equity Premium Income ETF (ASX: JEPI). This is a very good one - not for your 80-year-old grandmother, because there is an options overlay across the top to give you more income, especially in the international market. So it is higher risk, and you need to read the label and do your due diligence. But it does give you a decent dividend yield - around 6% - pays monthly. MER is about 0.4%. It gives you exposure to the international markets, especially the US. I think it’s a great complement to VHY on the Australian side. Just remember, options overlay means extra risk and a little extra cost.

Global exposure ETFs

Anna Dadic: Let’s shift gears now. Let’s face it, if you haven’t been invested in global stocks over the past 12 months, you’ve probably missed out on a chunk of performance. So what’s your favourite way to get that exposure? Adam, I’ll start with you.

Adam Dawes: So PGA1 (ASX: PGA1), the Plato Alpha Global Fund. This is where they’re able to make decisions on the long and the short. So when markets are moving higher, they can take advantage of that. When things aren’t doing so well, they can play the short side.

There are about 49 long positions and around 50–60 shorts at the moment. It does have a high concentration to the US, because obviously that’s where a lot of the global alpha has been coming from, but there are other countries in there as well. It pays a little income, not huge, but you’re getting that global growth. They returned around 36–38% last year above the benchmark of 20%. Absolutely killing it. That’s one we’ve got a lot of clients in, and it gives us that global exposure. We really like it.

Anna Dadic: Andrew, how have you been getting your international exposure?

Andrew Wielandt: So we’ve been using an active manager, Munro. Nick Griffin is a very switched-on individual, and his team has done very well in the managed fund space, and they’ve now got some ETFs.

The one we’re focused on is the Munro Concentrated Global Growth (ASX: MCGG). It holds 20 to 40 positions, so nowhere near as eclectic as PGA1. They’ve got “areas of interest” - digital, climate, advanced computing. Names you’d expect: Nvidia, Microsoft, Amazon.

They’ve done incredibly well - 30%+ returns over the last 12 months since listing, up about 20% per annum. The Rule of 72 says if they keep that up, they’d double every 3.5 years (past performance is not a future indicator, of course). Highly concentrated, take a view, don’t step back - and it’s paying off. Fees are a little pointy-ended - 0.7% plus a 1% performance fee. But hey, if you’re delivering that type of return, who cares?

Adam Dawes: Paid a great div as well - $2.50 a month ago. Looking quite good.

Thematic ETFs

Anna Dadic: Thematic ETFs have been all the rage lately. More than 40 are currently available on the ASX, and a recent investor survey showed more than 50% of respondents are planning to increase their thematic exposure over the coming year. Which thematic ETFs are top of the pops? Andrew, staying with you - what are you liking?

Andrew Wielandt: This is hot off the press. I was at a conference yesterday. An active manager there was quite anti-thematic ETFs, saying that by the time they come through marketing and compliance, it’s potentially too late. So, you’ve got to be nimble with these ones. Might be hot today, dead tomorrow. 

Adam Dawes: Yeah, I agree. Investors get wound up in lithium, copper, uranium stories, then the world moves on. And you’re left holding it, saying, “Oh, I think it’ll be good one day.” You’ve got to be nimble.

Andrew Wielandt: So - core and satellite. Simplistically, two-thirds core, one-third satellite.

And in the thematic space, we’ve been looking at Van Eck DFND (ASX: DFND). Now, I hope the products inside are never used, but the reality is the world at the moment - Ukraine, the Middle East, Taiwan - all has the market on edge. This ETF owns global defence companies - Palantir, RTX, Thales - are in the top three. It’s up 47% in the last six months. The index has averaged 50% per annum over three years. With Trump pushing for 5% of GDP in defence spend, I think this has legs. But, if there’s a ceasefire or peace agreement, global tensions fall, this ETF would come under pressure. For now though, it’s on everyone’s radar.

Anna Dadic: Adam, you’ve got something very different for us - an international ETF in a very interesting space.

Adam Dawes: Yes—it’s the Humanoid ETF (BATS: HUMN), listed on the NYSE. Buyer beware - this is high risk. Humanoids are projected to grow: by 2035 around 1.2 million humanoids, by 2050 around 300 million servicing everything - aged care, industry, and more. They even had the Humanoid Olympics the other day - running, soccer, testing all sorts of things. Now, HUMN holds about 12% Tesla, so you’re really investing in Tesla as well. But I think humanoids are going to be a big theme going forward. Do your own research before investing.

ETFs in the alternatives space

Anna Dadic: To round things out, I’ve asked the gents for their favourite alternatives ETFs. Alternatives is a broad church - it includes commodities, private markets, hedge funds. Adam, what’s your favourite?

Adam Dawes: I’ve gone boring and safe - GOLD (ASX: GOLD). As long as Donald Trump stays in power, gold is going to stay high and potentially keep rising. Everybody should have at least a 5% weighting. It doesn’t offer income - you’re just investing in the commodity itself, not the companies - but it’s a solid alternative.

Andrew Wielandt: And because it’s literally just gold bars sitting in a vault in London.

Anna Dadic: Andrew, bring us home. What are you liking in alternatives?

Andrew Wielandt: One I own in my own SMSF is L1 Capital Long Short Fund (ASX: LSF), run by Mark Landau. With active managers, it really is about the people and the process.

Over the last 12 months, it’s up 8% vs the market’s 12% - underperformed. But in the last 3 months, it’s up 15% vs the index up 3–4%. They really picked the lithium turnaround. Over 5 years, it’s up ~22% per annum vs the index at 13%. Yes, the MER is pointy at 1.44%, but if you’re delivering 900 bps of alpha per annum, I’ll happily pay. It’s long/short - 59 open long positions, 20 shorts. Playing both sides and doing a really good job. So LSF.

Anna Dadic: Andrew, Adam, thank you for giving us some ideas for everyone’s ETF portfolio and for joining Livewire today.

Andrew Wielandt: Thanks for inviting us.

Adam Dawes: Thank you, Anna.

Anna Dadic: Well, there you have it - a handful of ETF investment ideas for your watchlist or portfolio. Thanks to Adam and Andrew for their insights today. If you enjoyed that interview, make sure to give it a like, and don’t forget to subscribe to our YouTube channel, we release new content every week.