Key takeaways:

• IVV is the largest and most-established US-oriented ETF on the ASX with over $5 billion in funds under management

• NDQ has comfortably outperformed IVV and VTS over the last five years, but the fund charges a significantly higher management fee and is heavily influenced by a small group of holdings from the tech sector

In our last ETF piece, we looked at two of the most popular ETFs offering exposure to the local share market - Vanguard Australian Shares Index ETF and BetaShares' Australian 200 ETF.  This time around, our focus is the United States, home to the world largest stock market.While there are a number of funds that tap into this region, or at least the many high-profile stocks to come out of America, we're profiling three of the most popular US-oriented ETFs in the Selfwealth community. These include the iShares S&P 500 ETF (ASX: IVV), BetaShares Nasdaq 100 ETF (ASX: NDQ), and Vanguard US Total Market Shares Index ETF (ASX: VTS).

Each fund offers a different take on US equities, so without further ado, here are the key features and differences you should be aware of.

Fund Objective

Starting with the iShares S&P 500 ETF, this fund aims to provide investors with the performance of the S&P 500 Index, before fees and expenses. Those familiar with the S&P 500 would know that this index tracks the performance of roughly 500 large companies listed on US stock exchanges. 

Meanwhile, the Nasdaq 100 ETF offers a slightly different focus. This ETF aims to track the performance of the Nasdaq 100 Index, before fees and expenses. The Nasdaq 100 features the 100 largest non-financial companies listed on the Nasdaq market, with many of its constituents representing new-age sectors like tech and biotech.

The third fund up for comparison, the Vanguard US Total Market Shares Index ETF, seeks to track the performance of the CRSP US Total Market Index. This index consists of nearly 4,000 constituents across mega, large, small, and micro capitalisations, representing almost the entire US investable equity market.

Fund Profiles and Holdings

The ASX first admitted Blackrock suite of iShares ETFs back in 2007, and the iShares S&P 500 ETF was among the inaugural debutants. Since then, the US-oriented fund has grown to roughly $5 billion in funds under management. 

Just over 18 months later, Vanguard followed suit, with its stable of ETFs admitted to the local share market in 2009. The Vanguard US Total Market Shares Index ETF was part of that cohort, and while it is not as large as IVV, the size of the fund is around $3.1 billion.

The most recent of the group to debut on the ASX, the BetaShares Nasdaq 100 ETF, has been around for almost eight years. Making its debut back in May 2015, it is quickly closing the gap on its peers, with the fund size swelling to $2.6 billion in funds under management.

Of the trio, IVV posted the strongest inflow of funds last month across all ASX market participants and brokers. The fund attracted $15.4 million in funds, compared with $10.7 million for Vanguard VTS, and a $5.6 million outflow for the BetaShares Nasdaq 100 ETF. The latter, however, was the second most actively traded fund across the entire market, trailing only VAS.

Given the weight' of the largest US tech stocks relative to the key indexes, each of the three ETFs feature a similar core group of names as part of underlying holdings. However, the Nasdaq 100 is significantly more concentrated than its peers on account of there being less constituents in the fund, and since the index specifically excludes financial stocks.

In fact, NDQ top 10 constituents account for 54.2% of all holdings in the fund, and more than double the top 10 for IVV (26.3%) and VTS (21.1%).

IVV

NDQ

VTS

1Apple6.94%Apple12.36%Apple5.60%2Microsoft5.91%Microsoft12.25%Microsoft4.67%3Amazon2.56%Amazon6.13%Amazon2.05%4Nvidia1.82%Nvidia4.86%Tesla1.39%5Alphabet (Class A)1.71%Tesla3.66%Nvidia1.36%6Berkshire Hathaway1.67%Alphabet (Class A) 3.63%Alphabet (Class A)1.35%7Alphabet (Class C)1.52%Alphabet (Class C)3.62%Berkshire Hathaway1.29%8Tesla1.50%Meta Platforms3.58%Alphabet (Class C)1.17%9Exxon Mobil1.24%Broadcom2.10%Exxon Mobil1.14%10Meta Platforms1.33%Pepsico1.96%UnitedHealth Group1.12%

Sector weightings also highlight the significance that tech stocks play as part of the Nasdaq 100 ETF, and how the fund offers no exposure to financials nor materials, and little in the way of energy.

IVV

NDQ

VTS

Information Technology

28.2%

50.3%

25.1%

Healthcare

14.5%

6.4%

13.6%

Financials

10.7%

0%

15.2%^

Consumer Discretionary

10.4%

15.9%

14.2%

Industrials

8.5%

3.6%

13.7%

Communication

7.8%

16.1%

2.4%

Consumer Staples

6.8%

6.0%

5.5%

Energy

4.7%

0.5%

4.9%

Utilities

2.9%

1.2%

3.1%

Materials

2.7%

0%

2.3%

^includes real estate

Performance and Distributions

Since inception, NDQ has outperformed its peers with an average return of 16.08% p.a. after fees, compared with 14.43% p.a. for VTS and 5.65% p.a. for IVV. 

It is worth noting that IVV performance is backdated to the inception date for its US-domiciled ETF, which was back in 2000. As the fund was first launched in the US around the time of the dot-com crash, and also operated through the GFC, its long-term performance is weighed down by these periods.

However, over the last five years, and up until the end of February 2023, IVV has returned 12.70% p.a. In comparison, NDQ has returned 15.56% p.a. and VTS has yielded returns of 12.56% p.a.

At this time we should remind everyone that past performance is not indicative of future performance, so the above results are merely a picture of how these funds fared in the past.

In terms of distributions, both the iShares S&P 500 ETF and the Vanguard US Total Market Shares Index ETF provide distributions on a quarterly basis. On the other hand, the BetaShares Nasdaq 100 ETF pays biannual dividends. As with any ETF, the amount and timing of distributions will vary from period to period, and there may even be periods where no distributions are made.

Fees

Management fees are a critical consideration for any investor looking to buy and hold ETFs. These fees and costs are accrued daily and deducted from a fund assets, so ultimately they are built into the NAV and price of the ETF.

BetaShares' Nasdaq 100 ETF is the dearest of the bunch, with a management fee and cost of 0.48% p.a. Blackrock and Vanguard both pitch their respective ETFs as low-cost options, with the iShares S&P 500 ETF and Vanguard US Total Market Shares Index ETF attracting management fees of 0.04% p.a. and 0.03% p.a. respectively.

Investors should familiarise themselves with each fund Product Disclosure Statement for any other costs and expenses, which may be deducted from the fund assets as and when they are incurred. 

Summary

The differences between the most popular US-oriented ETFs runs quite deep, not only in terms of what they offer exposure to, but their performance, fees, and even the frequency of distributions. 

BetaShares Nasdaq 100 ETF is largely tailored towards tech exposure, and a core group of ten holdings, whereas IVV and VTS offer broader exposure to other sectors in addition to medium-sized and small-cap companies.

Thanks to its strong performance over recent years, the size of NDQ funds under management has grown quickly, but it also attracts a significantly higher management fee than the iShares S&P 500 ETF and the Vanguard US Total Market Shares Index ETF.

IVVNDQVTSTracking

S&P 500 Index

(500 large-cap stocks)

Nasdaq 100 Index(top 100 non-financialNasdaq stocks)

CRSP US Total Market Index

(4,000 stocks of all sizes)

Net Assets

$5.0 billion

$2.6 billion

$3.1 billion

Top 10 Holdings (weight)

26.30%

54.20%

21.1%

5-Year Performance (p.a.)

12.70%

15.56%

12.56%

Distributions

Quarterly

Biannually

Quarterly

Management Fees (p.a.)

0.04%0.48%

0.03%