Betashares FTSE RAFI Australia 200 (ASX: QOZ) is advantaged for its ability to extract value from proven long-term risk premia through thoughtful, passive indexing. The ETF earns a Silver Medalist Rating from our analysts.

The strategy utilizes a fundamentals-based indexing approach to deliver a portfolio reflective of established economic principles. Its underlying FTSE RAFI Australia 200 Index conforms to a contrarian methodology, using the five-year average of four metrics—book value, sales, cash flow, and dividend—to build a portfolio of reliable and undervalued stocks. The strategy operates in a cautious style, reducing exposure to rallying stocks at rebalancing dates if fundamental metrics do not rise in step. So while a bullish market may present challenges to the return performance of the fund, its preference for financial health should provide solid capital protection.

The resulting portfolio has a value tilt and is heavily skewed to cyclical sectors, which typically form almost three-fourths of the overall allocation. These characteristics are not uncommon for contrarian strategies, either active or passive, that seek out-of-favor stocks at cyclical lows. Regardless, the strategy is in good stead for its alignment with proven, long-term sources of alpha. Key elements of its design, such as the use of trailing statistics in its weighting methodology to limit turnover, serve to support its investment case.

Value strategies have faced headwinds over much of the past decade-plus, pulling down their relative performance attributes. However, there have been periods over the past four years—most notably in 2022 and in the year-to-date to Aug. 31, 2025—that have been more conducive to performance. The strategy’s profile has historically been characterized by intermittent bursts of outperformance with prolonged periods of mild underperformance, symptomatic of an index constructed to benefit from distinct periods of mean reversion.

While relative performance can vary across time frames, the fund has strong potential to generate positive alpha over sufficient horizons by adhering to empirically proven characteristics of outperformance.

Investment process

Betashares FTSE RAFI Australia 200 tracks the FTSE RAFI Australia 200 Index. The underlying index is developed by US-based Research Affiliates and consists of the top 200 companies listed on the ASX, as measured by four fundamental measures: book value, sales, cash flow, and dividend. The four measures are considered equally in generating a composite score, which is then used to determine stock weightings. Five-year averages are used for the first three factors, with the latest available book value applied.

The approach leads to fairly steady sector exposures over time, even as the Morningstar Category benchmark shifts around because of market volatility. Given that the five-year fundamental measures do not change as rapidly as market cap, the strategy tends to redistribute capital from trending to more moderately priced stocks. Turnover is higher than traditional index funds, as it rebalances quarterly, but it is lower compared with most active funds.

The fund pays distributions semiannually and permits reinvestment of dividends. Betashares offers investors the requisite exchange-traded fund provisions of close index tracking, liquidity, and strong volumes. Operationally, the fund is managed well, with reasonable bid-ask spreads.

The fund has conventional sectoral allocations with a value bias. Market-cap-weighted Australian equity benchmarks are dominated by select sectors and companies. A handful of large financial-services and materials companies make up a significant slice of the overall pie. Here, the underlying index reflects these top-down traits, as well as the Australian stock market’s home bias, with the big banks, supermarkets, and telecoms largely generating their earnings domestically.

With an active share (a measure of the differences in stock holdings between a portfolio and a benchmark) of around 25% versus the S&P/ASX 200 category benchmark, the portfolio’s composition is fairly representative. The strategy has typically had a high proportion of assets in the top 10, at around 50%. The methodology explicitly prefers dividend-paying companies and exhibits a higher trailing 12-month dividend yield than the category index and average peer. The most significant sector overweighting in the medium term has been financials, within which the strategy underweights Commonwealth Bank while overweighting Westpac, National Australia Bank, and ANZ Group.

The total cost ratio for the ETF is 0.40%.

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