What the ETF? Global shares and Australian bank ETFs have been hot in 2021; and there are more to come

The eight top performing ASX Exchange Traded Funds (ETFs) in 2021 are either focused on banks or offer exposure to global assets.

Eight ASX ETFs have gained over 10 per cent in the first two months of 2021. Two of these are bank focused in VanEck Australian Bank ETF (ASX:MVB) and the BetaShares Global Banks ETF (ASX:BNKS).

The remaining six have a broader global focus with the top being iShares Core S&P Small-Cap ETF (ASX:IJR) up 17 per cent in 2021.

Here’s how ASX ETFs have performed in 2021…

At this time last year, as COVID-19 hit the global markets investors feared banks would suffer from a fall in people’s incomes and a rise in bad debts.

But 12 months on, the worst fears haven’t come to pass as Jamie Hannah, Van Eck’s Deputy Head of Investments & Capital Markets told Stockhead.

“The banking sector’s been particularly strong this year. Australia’s had a growing economy – which helps them,” he said.

“And for a lot of them provision for bad debts is going down, so even though people are coming off JobKeeper it’s not resulting in increasing bad debt. I think yields increasing should help their margins as well.”

However the ASX was far from the only exchange with solidly performing bank ETFs in 2021.

“I look at global banking ETFs, one in the US and Europe they’ve had excellent years as well – other offshore banking ETFs, some of them returned 20 or more per cent year to date,” Hannah said.

“So from what I’m seeing the bank sector is gaining from the global economy at the moment and MVB benefits from that.”

As for global-focused ASX ETFs, Hannah put it down to investor optimism about the global economy and its growth prospects in 2021.

ASX ETFs still to come in 2021…

In the weeks to come Van Eck will be launching three new ETFs, all of which give investors exposure to global assets. Namely:

• VanEck Vectors MSCI International Small Companies Quality ETF (ASX: QSML)
• VanEck Vectors MSCI International Value ETF (VLUE) 
• VanEck Vectors Global Clean Energy ETF (ASX: CLNE)

This will take Van Eck’s total of ETFs to 28, up from 19 just a year ago.

VanEck’s head of Asia Pacific Arian Neiron said the new ETFs would leverage stong investment themes.

“Value, as an investment style, for example, has been performing well in recent months and could continue to do so when global economies recover from the COVID-19 pandemic and if we see reflation,” Neiron said.

“VLUE will allow investors to add a value tilt to their portfolio, with 250 companies selected by MSCI based on its value factor for passive fees.

“Separately, QSML will give investors exposure to a diversified portfolio of international developed market small-cap quality growth companies with durable business models and sustainable competitive advantages.

“Many investors seek capital growth opportunities by investing in small companies such as those found in the S&P/ASX Small Ordinaries. The international opportunity is 20 times bigger with approximately 4,000 listed international small companies making up the benchmark, MSCI World ex Australia Small Cap Index.”

As for the Clean Energy ETF, Neiron said it would allow investors to leverage the growing demand for renewable energy. It will track the S&P Global Clean Energy Index, which grew 116 per cent in the 12 months to January 2021.

BetaShares is currently marketing two ASX ETFs for later in 2021 – the Betashares Climate Change Innovation ETF (ASX:ERTH) and the Betashares Cloud Computing ETF (ASX:CLDD).

The latter of these will be the ASX’s first dedicated cloud computing ETF, tracking the Indxx Global Cloud Computing Index.

An ETF for Redditors?

Turning briefly to global ETFs, there’s one that shows the GameStop saga may not be a one off.

In January shares in US video games retailer GameStop (NYSE:GME) went viral after GameStop fans started an online campaign to encourage their followers to buy GameStop stock, and boost its share price.

This forcing short sellers (of which there were plenty) to cover their positions causing a frenzy of buying, and as the share price of GameStop went higher, the more it cost short sellers as they had to buy even more to offset their growing losses on trades.

The incident was portrayed as slap in the face to traditional Wall St players in that they no longer control things. Unfortunately for them, a new ETF in the US shows incidents like this may occur again.

VanEck is launching an ETF that will track the 75 most-favourably mentioned companies on the internet – VanEck Vectors Social Sentiment ETF (NYSE:BUZZ).

But if you look at BUZZ’s biggest holdings, the ETF does not appear to be too unconventional.

Its top 10 holdings are: Twitter, DraftKings, Ford Motor Company, Facebook, Amazon, Apple, Advanced Micro Devices, American Airlines, Netflix and Tesla.

BUZZ’s founder Dave Portnoy hasn’t been holding back.

Portnoy is the founder of pop culture blog Barstool Sports and he regularly tweets about his stock trades – particularly during the GameStop saga.