What is the Vanguard Diversified High Growth Index ETF invested in?

VDHG is a rather special ASX ETF. Let’s look at why…

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Key points

  • Most ASX ETFs on the market track indexes and hold shares
  • But VDHG does neither, instead functioning as an 'ETF of ETFs'
  • We take a look at exactly what VDHG invests in 

ASX exchange-traded fund (ETF) provider Vanguard has many popular ETF products on the ASX that are relatively well known. Take the Vanguard Australian Shares Index ETF (ASX: VAS). It is by far the most popular index fund on the ASX. But a lesser-known fund is the Vanguard Diversified High Growth Index ETF (ASX: VDHG).

This ETF currently has just $1.72 billion in funds under management, which is vastly below that of VAS. VAS is sitting at around $10 billion right now. But VDHG is a rather special ETF, so let’s dig into why.

The Vanguard Diversified High Growth Index ETF is a little different to your classic index fund. Whereas an ETF like VAS tracks an index and holds ASX shares within its portfolio, VDHG does neither. It instead functions as an ‘ETF of ETFs’. It includes positions in a number of other Vanguard ETFs to give investors massive diversification.

What exactly does the VDHG ETF invest in?

Let’s break it down. So as it currently stands, 35.9% of VDHG’s portfolio is invested in the Vanguard Australian Index Fund (wholesale), which is essentially an unlisted version of VAS.

Another 26.5% of the fund resides with the Vanguard International Shares Index Fund, with another 16.2% in the version of this fund hedged to Australian dollars.

Then we have a 7.1% allocation to the Vanguard Global Aggregate Bond Index Fund. A further 6.2% goes to the Vanguard International Small Companies Index Fund.

Rounding out the portfolio, we have a 5% weighting to the Vanguard Emerging Markets Shares Index Fund and a 3.1% dedicated to the Vanguard Australian Fixed Interest Index Fund.

So VDHG can be thought of as a mix of various other Vanguard ETFs, all in one investment. It’s a ‘high growth’ fund because this particular ETF has high weightings to ‘risky’ asset classes like small companies and emerging markets, and low weightings to ‘safe’ assets like fixed interest and bond investments.

Vanguard provides other ETFs in this ilk that reverse this weighting. For instance, the Vanguard Diversified Conservative Index ETF (ASX: VDCO) invests in similar underlying investments. But it instead gives far more weight to the bond and fixed interest investments, and less to shares, than VDHG.

So that’s how the Vanguard Diversified High Growth Index ETF puts money to work on its investors’ behalf. VDHG charges a management fee of 0.27% per annum.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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