Meet David - He’s taking on Australia’s ETF Goliaths (with just 10 stocks and a bold plan)

The local ETF industry’s explosive growth is showing no signs of slowing. Funds are flowing in at a rapid clip, and new products continue to hit the market almost weekly.

Over the past 12 months alone, Australia’s ETF industry has grown by more than $53 billion in funds under management - a booming 27% increase. 

At this pace, it’s on track to crack $300 billion by the end of 2025.

Investors now have more than 400 exchange-traded products to choose from. But despite the proliferation of choices, the market remains dominated by a few big players: Vanguard, iShares, Betashares, VanEck, and Global X collectively accounted for over 90% of ETF flows last year.

But that isn’t stopping David Tuckwell, son of ETF pioneer Graeme Tuckwell, from entering the arena. With the launch of ETF Shares, he’s hoping to take on the giants with a back-to-basics approach and a laser focus on low fees.

Fees first, themes second

ETF Shares has launched with three US-focused funds, all priced at a 0.29% management fee. It’s a straightforward proposition: target popular investment themes like quality and technology, but do it at a lower cost.

Tuckwell believes the US remains one of the most attractive investment destinations globally, despite growing concerns around valuations and economic resilience.

“We don’t believe that US exceptionalism is ending,” he says. “The EPS growth in the US is the highest. The margins, those wonderful margins US companies earn, are on average 2.5% higher than their overseas competitors.”

Tech stocks with venture-style upside

While backing US tech giants isn’t a radical new idea, Tuckwell argues investors are underestimating just how much optionality these companies offer.

“When you invest in the Magnificent 7, you essentially participate in a venture capital fund, but without the two-and-twenty fee structure,” he says.

“They’re very much the growth engines of the future. They embed a lot of optionality, and they run like VC funds without the fees. So very appealing investments to us.”

The HUGE ETF, one of the debut products from ETF Shares, offers extreme concentration, holding only the top 10 stocks on the NASDAQ. That’s a bold move in a world where diversification is often touted as the only free lunch in investing.

“If you take out the top ten stocks from the NASDAQ, there’s been no EPS growth in aggregate over the past two years,” Tuckwell says. “All the growth has come from those names.”

The trend isn’t limited to the NASDAQ. The top 10 stocks in the S&P 500 account for half of the index’s market cap growth over the past five years. Tuckwell believes many investors want pure exposure to those companies and aren’t concerned by the volatility that comes with it.

Respectfully stepping into the ring

Tuckwell is no stranger to the ETF world. He’s worked in the industry his entire career, most recently at ETF Securities (now Global X), and has closely watched its development both locally and globally.

It’s a very different landscape from when his father launched Australia’s first gold ETF in 2003. Today, the industry is fiercely competitive, with global heavyweights and well-established local players dominating the market.

But Tuckwell is optimistic that by staying nimble, keeping costs low, and launching targeted products, ETF Shares can win a slice of the rapidly growing pie.

The obvious question is: Where are the gaps in Australia’s ETF landscape?

And perhaps more importantly: Is there still room for a new player with a different take?