This ASX ETF has returned 12.5% annually since inception

Betashares Australian Quality ETF (ASX: AQLT) has returned an average 12.5% per year to investors since its inception in April 2022.

AQLT does things a little differently to standard index-tracking exchange-traded funds (ETFs).

Instead of tracking an index of stocks ranked by market capitalisation, AQLT ranks them according to the quality of the underlying businesses.

AQLT tracks the performance of the Solactive Australia Quality Select Index.

Solactive defines quality stocks as those with high return on equity (ROE), low debt, and stable earnings.

The biggest benefit here is that Solactive is regularly assessing ASX shares to decide which companies make the grade for its index.

For ordinary retail investors, this is like having a professional portfolio manager without the high fees.

This is very different to ETFs tracking market-cap indexes, which are heavily influenced by investor sentiment.

Which ASX shares make the grade for this ETF?

The AQLT ETF provides concentrated exposure to 40 ASX shares.

Its top holdings today are Wesfarmers Ltd (ASX: WES) shares at 6% of funds, Telstra Group Ltd (ASX: TLS) at 5.9%, BHP Group Ltd (ASX: BHP) at 5.9%, Australia and New Zealand Banking Group Ltd (ASX: ANZ) at 5.2%, and National Australia Bank Ltd (ASX: NAB) at 5%.

The ETF also holds a bunch of ASX mid-cap shares.

These include Neuren Pharmaceuticals Ltd (ASX: NEU), ARB Corporation Ltd (ASX: ARB), HUB24 Ltd (ASX: HUB), Breville Group Ltd (ASX: BRG), NIB Holdings Limited (ASX: NHF), Codan Ltd (ASX: CDA), and Ramelius Resources Ltd (ASX: RMS).

AQLT's small-cap holdings include Data#3 Ltd (ASX: DTL), Monadelphous Group Ltd (ASX: MND), Magellan Financial Group Ltd (ASX: MFG), NRW Holdings Limited (ASX: NWH), and Smartgroup Corporation Ltd (ASX: SIQ).

The top sector allocations are financials (36%), materials (14%), consumer discretionary (13%), healthcare (10%), and industrials (8.5%).

AQLT ETF distributes dividends twice per year. The management fee is 0.35% per annum.

On Tuesday, AQLT ETF closed at $34 per unit.

The ETF has risen 10.1% in the year to date (YTD) compared to a 6.3% bump for the S&P/ASX 200 Index (ASX: XJO).

AQLT typically has an annual distribution yield of 3.4%, which is similar to the average ASX 200 dividend these days.

This means AQLT is on track to deliver total returns of 13.5% in calendar year 2025.

It looks like it will also meet its mandate, as explained by Betashares:

The Fund's focus on quality aims to produce long-term performance superior to that of the benchmark S&P/ASX 200 Index.

Andrew Wielandt from DP Wealth Advisory recommends AQLT to retail investors.

On The Bull in September, Wielandt revealed that he holds this ASX ETF in his self-managed super fund (SMSF).

The post This ASX ETF has returned 12.5% annually since inception appeared first on The Motley Fool Australia.

Motley Fool contributor Bronwyn Allen has positions in BHP Group, BetaShares Australian Quality ETF, and Magellan Financial Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ARB Corporation, Hub24, and Wesfarmers. The Motley Fool Australia has positions in and has recommended NIB Holdings, Smartgroup, and Telstra Group. The Motley Fool Australia has recommended ARB Corporation, BHP Group, Hub24, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2025