Bitcoin, video game fund ETFs almost double returns for investors

Wealth platform InvestSMART studied the returns and inflows of 388 ETFs listed in Australia last financial year and found that, despite some sector-specific ETFs delivering huge returns, investors mainly bought into broadbased index funds.

The DigitalX Bitcoin ETF (ASX code: BTXX) topped the table, with a one-year return of 95.5 per cent, but after launching in July 2024 is yet to prove itself over the long term.

“BTXX is a passive holder of bitcoin … this leaves the fund highly exposed to downturns in a single cryptocurrency and history tells us just how volatile bitcoin can be,” the report said.

10 best-performing ETFs in 2024-25

ETF	One-year return	Management expense ratio (MER)
DigitalX Bitcoin	95.5%	0.49%
Betashares Video Games and Esports	90.3%	0.57%
VanEck Bitcoin	76.5%	0.49%
VanEck Video Gaming & eSports	66.4%	0.55%
Betashares Global Gold Miners*	54.7%	0.57%
VanEck Gold Miners	52.7%	0.53%
iShares China Large-Cap	44.9%	0.60%
Global X Gold Bullion	43%	0.15%
VanEck Gold Bullion	42.7%	0.25%
iShares Physical Gold	42.7%	0.18%

Source: InvestSMART (* denotes currency hedged)

The second-best performer was the Betashares Video Games and Esports ETF (GAME), up 90.3 per cent. It invests mainly across the US, Japan and China and includes industry leaders Roblox and Nintendo.

“The global online gaming market is currently valued at $US225bn ($347bn) and is forecast to grow to $US424bn by 2032,” the report said.

Gold and goldminer-related ETFs also climbed strongly, as did defence ETFs – although these were not covered by the analysis because they launched in late 2024.

InvestSMART chief executive Ron Hodge said defence ETFs launched by VanEck, Betashares and GlobalX delivered returns of between 56 per cent and 74 per cent for the financial year, boosted by soaring global defence spending.

“Geopolitical tensions, particularly in the Middle East and Ukraine, have also been a big driver of these returns,” Mr Hodge said.

InvestSMART found the worst performers were ETFs designed to profit from declining sharemarkets. Other strugglers focused on biotechnology, crude oil and healthcare.

10 worst-performing ETFs for 2024-25

ETF	One-year return	Management expense ratio (MER)
Betashares US Equities Strong Bear Complex*	-31.4%	1.38%
Global X Ultra Short Nasdaq 100 Complex	-27.4%	1%
Betashares Australian Equities Strong Bear Complex*	-20.6%	1.29%
Betashares Global Healthcare*	-11.2%	0.57%
Global X S&P Biotech	-9.5%	0.45%
Betashares Crude Oil*	-9%	1.29%
Betashares Australian Equities Bear Hedge	-6.9%	1.48%
iShares Global Healthcare	-5.5%	0.41%
Betashares Geared Short Aus. Gov. Bond Complex	-5%	0.99%
Betashares Strong Australian Dollar Complex	-5%	1.38%

Source: InvestSMART (* denotes currency hedged)

The most popular ETFs, based on net inflows, were low-cost index funds focusing on broad markets. An extra $3.7bn flowed into the Vanguard Australian Shares ETF, which has management costs of just 0.07 per cent, taking its total funds under management to $20bn.

The Vanguard MSCI International ETF ranked second in the popularity stakes with an extra $2.3bn of inflows, taking total funds to $11.7bn.

“Vanguard is widely recognised for pioneering passive ETF investing around the world,” Mr Hodge said.

“There has been a strong trend towards passive, broadbased index investing over the past few years off the back of strong evidence that most active managers do not beat their indices.”

Catapult Wealth managing director Tony Catt said investment in large index funds was a “safer, diversified, lower-risk way to invest”.

“You are broadly diversified across countries and are broadly diversified across asset classes,” Mr Catt said.

10 most popular ETFs for 2024-25

ETF	Net inflow	Management expense ratio (MER)	One-year return
Vanguard Australian Shares	$3.69bn	0.07%	14.90%
Vanguard MSCI International	$2.27bn	0.18%	17%
Betashares Australia 200	$1.81bn	0.04%	14.80%
Vanguard Global Aggregate Bond*	$1.7bn	0.20%	4.80%
iShares S&P 500	$1.56bn	0.04%	15.20%
Vanguard MSCI International (hedged)*	$1.44bn	0.21%	12.60%
Betashares Global Shares	$1.09bn	0.08%	17.20%
Vanguard Australian Shares High Yield	$1.02bn	0.25%	14.90%
VanEck MSCI International Quality	$1.02bn	0.40%	6.60%
iShares Core S&P/ASX 200	$979m	0.05%	14.90%

Source: InvestSMART (* denotes currency hedged)

Mr Catt said demand for sector-specific ETFs was growing and investors often had a “core-satellite approach” with most of their money in index funds.

“That approach is where you have 85 per cent in core funds and, depending on our view of the world at the time, we might go into a cybersecurity ETF or a robotics ETF or a healthcare ETF around it to invest in sector-specific growth stories,” he said.

Index funds have much lower costs than sector-focused ETFs, and the research found management expense ratios (MERs) ranged from 0.03 per cent to 2.56 per cent.

“Generally the rule is the more specialised you get, say for example a cryptocurrency fund, the higher the costs are going to be,” Mr Catt said.

He said he expected the ETF industry to continue growing, “particularly as this wealth transition happens from generation to generation”.

InvestSMART’s Mr Hodge said a MER below 0.2 per cent was considered good for a large diversified ETF, “but many these days are below 0.1 per cent”.

“We believe the Australian ETF industry will continue to grow by 15-20 per cent per year,” Mr Hodge said.

This article first appeared in The Australian as Bitcoin, video game fund ETFs almost double returns for investors