Sector and Strategy ETFs

ETFs can focus on a sector of the market

An ETF can track a sector index. These ETFs give you exposure to a particular segment of the Australian sharemarket, rather than to the broad market as a whole.

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What is a market sector?

A market sector consists of a group of companies from the same or similar industries.

The Australian market uses the Global Industry Classification System (GICS) to classify companies into various sectors and industry groups such as:

• Energy
• Financials
• Industrials, and
• Telecommunication Services.

Please refer to the ASX website for more information on market sectors.

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What does a sector index measure?

A sector index measures the performance of the companies that fall into that sector.

For example, the S&P/ASX 200 Financials index measures the performance of the companies within the S&P/ASX 200 index that are classified by GICS into the 'Financials' sector.

Some indices measure the performance of several GICS sectors combined.

For example, the S&P/ASX 200 Resources Index measures the performance of companies within the S&P/ASX 200 index that are classified by GICS into the 'Energy' or 'Metals or Mining' sector.

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What do ETFs with a sector focus try to achieve?

A sector ETF allows you to trade a view that a particular market sector will perform well.

Buying a sector ETF gives you instant exposure to stocks in that sector. Rather than having to pick stocks, you gain diversified exposure.

For example, if you think the Resources sector will outperform the broad sharemarket, you could buy an ETF that tracks the S&P/ASX 200 Resources index.

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Strategy ETFs

Sometimes investors have themes they want to pursue - such as enhanced dividend yield.

A bespoke index may be created to serve as a benchmark against which to measure the performance of that strategy. It is then possible to issue an ETF that tracks that index.

Indices that are created specifically for the purpose of issuing these niche ETFs may be subject to more frequent compositional change than other indices. The PDS for the ETF will contain information about how the index is constructed, and provide details of any relationship that exists between the index provider and the ETF issuer.