Three Quality-Focused ETFs Apply Different Rules and Deliver Different Returns
The three ETFs—SPHQ, QUAL, and MOAT—all target quality companies but use different screening methods, leaving only Applied Materials, Chipotle, Fortinet, and Zoetis in all three portfolios. MOAT depends on analyst assessments and charges 0.46%, compared with 0.15% for the other two. MOAT also lagged, returning 7.76% year to date versus 14.33% for QUAL and 13.32% for SPHQ.
SPHQ screens S&P 500 constituents using return on equity, accruals, and leverage, then keeps the top 100; financial and real estate firms face only two of those tests. Its weights combine quality scores with market capitalization under sector and security limits.
QUAL tracks an MSCI index emphasizing profitability, steady earnings, and modest debt, with a 0.15% fee. MOAT instead relies on Morningstar analysts’ views of durable competitive advantages and fair-value discounts, charges 0.46%, and returned 7.76% year to date versus 14.33% for QUAL and 13.32% for SPHQ.
The differing definitions may affect ordinary investors and retirement savers who use ETFs, because fee levels and portfolio composition can influence costs and diversification. Companies included or excluded could see marginal changes in demand for their shares. Advisers and plan sponsors may need to explain that similarly labeled quality funds can behave differently, especially when one relies on analyst judgment and charges more.