A factor ETF holds a slice of the global share market chosen by a rule: cheap shares (value), strong, profitable businesses (quality) or shares that have been rising (momentum). Over the year to 30 September 2026, VLUE returned +46.8% against +10.1% for VGS, while QUAL matched VGS exactly. Factor funds cost two to five times as much as a plain index fund and can lag for years, so they suit investors who use them as a tilt beside a low-cost core, not as a replacement.
What is factor investing?
A plain global ETF such as VGS or BGBL buys almost every large company in the developed world, sized by market value. A factor ETF starts with the same universe, then keeps only the companies that score well on one trait, or "factor", that researchers have linked to long-run returns.
- Value buys companies that look cheap against their earnings, assets or cash flow. The bet is that unloved shares are often priced too low.
- Quality buys companies with high returns on equity, steady earnings and low debt. The bet is that strong businesses hold up better and compound for longer.
- Momentum buys shares that have risen the most over the past 6 to 12 months. The bet is that winners tend to keep winning for a while.
- Multi-factor funds blend several of these, and minimum volatility funds pick the steadiest shares.
These funds are still index funds. They follow a published rule and rebalance on a schedule, usually every six months, rather than relying on a manager's judgement. That makes them cheaper than most active funds, but dearer than a plain index fund.
The main factor ETFs on the ASX
Most of the money sits with VanEck, iShares and Betashares. The new GTUM only listed in February 2026 and took $205.9 million in September alone, almost all of its $228 million. QUAL added another $195.3 million in the same month.
| ETF | Factor | Fee | Size | 1 year | 5 years |
|---|---|---|---|---|---|
| QUAL (VanEck) | Quality | 0.40% | $9,231m | +10.1% | +71.5% |
| QHAL (VanEck, hedged) | Quality | 0.43% | $2,681m | +16.5% | +58.6% |
| VVLU (Vanguard, active) | Value | 0.28% | $1,404m | +16.9% | +76.0% |
| DGVA (Dimensional, active) | Value | 0.45% | $1,270m | +21.6% | n/a |
| VLUE (VanEck) | Value | 0.40% | $643m | +46.8% | +114.8% |
| GTUM (Betashares) | Momentum | 0.35% | $228m | n/a (new) | n/a |
| HVLU (VanEck, hedged) | Value | 0.43% | $164m | +57.8% | n/a |
| WDMF (iShares) | Multi-factor | 0.35% | $151m | +12.5% | +69.0% |
| IVLU (iShares) | Value | 0.25% | $43m | +43.1% | n/a |
| IQLT (iShares) | Quality | 0.25% | $42m | +10.2% | n/a |
| IMTM (iShares) | Momentum | 0.25% | $39m | +17.0% | n/a |
| IVHG (iShares, hedged) | Value | 0.28% | $8m | +54.2% | n/a |
| VGS (plain index) | None | 0.18% | $18,679m | +10.1% | +74.6% |
Cumulative total returns to 30 September 2026. Size and September flows from the TMX Australia monthly funds report.
There is also IACT, an active iShares fund that rotates between factors in US shares. It took $177.1 million in September, so factor investing clearly has the market's attention right now.
How each factor has performed
The last year was a value year. VLUE, IVLU and their hedged versions all returned more than 40%, roughly four times the market. Momentum also beat the market, with IMTM up 17.0%. Quality simply kept pace.
Value ran away with it this year
One year proves very little. Over five years the picture is closer. VLUE still came out well ahead, but QUAL, the multi-factor WDMF and the quality-focused QLTY all finished behind plain VGS. The minimum volatility fund WVOL trailed by almost 30 percentage points, which is the price of a smoother ride in a strong market.
Did the factor beat plain VGS?
What $10,000 grew to
This is normal for factors. Value lagged growth shares for much of the 2010s, and investors who gave up on it missed the recent rebound. Each factor has long dry spells. Nobody can reliably tell you when the next one starts.
Momentum: the newest arrival
GTUM is the fund everyone is talking about, but it has less than a year of history, so judge it on how it is built rather than on past returns. It rose 6.4% in September alone. Its top holdings include Johnson & Johnson, Micron, ASML, Applied Materials and Lam Research, and 46.5% of the fund sits in information technology, against about 30% in VGS. The cheaper IMTM follows a similar idea and shares about 61% of its holdings with GTUM.
- Strength: momentum funds lean into whatever is working, which has helped over the past year.
- Weakness: they can be caught out when the market turns sharply, because they hold last year's winners until the next rebalance.
- Watch the Australian version: MTUM, Betashares' Australian momentum fund, lost 5.5% over the year while IOZ gained 2.6%. Same idea, different result.
How much each fund puts in technology
How much do they overlap with VGS?
If you already own VGS or BGBL, the key question is how much a factor fund actually changes. Quality changes the least: QUAL shares about 41% of its weight with VGS, because high-quality companies such as Microsoft, Apple and NVIDIA are also the market's giants. Value changes the most. VLUE and QUAL share only about 4%, so they are close to opposites.
How much of each fund is already in VGS
A surprise: Micron is a top holding in VLUE, IVLU, GTUM and IMTM. IVLU puts 14.0% of the fund in that one company. Factor labels are rules, not guarantees of diversification, so always look inside. Check the overlap in our calculator →
What they cost you
Factor funds charge 0.25% to 0.45% a year, against 0.08% for BGBL and 0.18% for VGS. That gap compounds. On $100,000 over 20 years, assuming a 7% return before fees, the fee drag on BGBL is about $5,746. On QUAL or VLUE it is about $27,927.
Fees on $100,000 over 20 years
The iShares range (IMTM, IQLT, IVLU) is the cheapest way into each single factor, but those funds are small, at $39 to $43 million, and trade with wider spreads. The VanEck funds are larger and more liquid, but dearer.
How investors use them
- Core and satellite. Many investors keep most of their global shares in a low-cost fund like VGS or BGBL and add a 10 to 20% tilt to one factor.
- Pair opposites. Because quality and value barely overlap, some hold both to avoid betting on a single style.
- Hedged or not. HVLU and QHAL remove currency moves. They beat the unhedged versions over the past year as the Australian dollar rose. See our guide to hedged vs unhedged ETFs.
- Closer to retirement? Factor funds are still 100% shares. They do not make a portfolio defensive, and a factor in a dry spell can be hard to sit through when you are drawing an income.
Compare them directly: QUAL vs VLUE, VGS vs QUAL, VGS vs VLUE, VLUE vs HVLU and VVLU vs VLUE. Or browse every international shares ETF.
Common questions
What is the best factor ETF in Australia?
There is no permanent winner. VLUE has the best five-year return to 30 September 2026 at +114.8%, QUAL is by far the largest at $9.2 billion, and the iShares range is the cheapest at 0.25%. Which factor leads changes over time.
Is QUAL better than VGS?
Not on recent numbers. QUAL matched VGS over one year, lagged by 7.5 points over three years and by 3.1 points over five, while charging 0.40% against 0.18%. It holds fewer, more profitable companies, which some investors prefer.
What is a momentum ETF?
A momentum ETF buys the shares that have risen the most over the past year or so and rebalances regularly. GTUM and IMTM do this for global shares, and MTUM for Australian shares.
Should I hold a value ETF and a quality ETF together?
Some investors do, because QUAL and VLUE share only about 4% of their holdings, so the two styles tend to take turns. It adds cost and complexity compared with one plain global fund.
Joshua Stega is a financial adviser with 20 years' experience and the founder of ETF Adviser. He built ReviewETF to make every Australian ETF easy to find and compare.
General information only. It does not take into account your objectives, financial situation or needs. Consider the PDS and TMD before investing. Past performance is not a reliable indicator of future performance. Data as at 30 September 2026.