Why did the Vanguard Australian Shares Index ETF (VAS) fall 4% in April?

It was a painful month for the VAS ETF. What happened?

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The Vanguard Australian Shares Index ETF (ASX: VAS) unit price fell 4% in April 2024, which is one of the most painful months over the past couple of years.

An exchange-traded fund's (ETF) return is dictated by the performance of the underlying holdings. The bigger the position in the portfolio, the more influence that stock has on the ETF's portfolio.  

What went wrong?

Without looking at the performance of every single ASX share, I'll point to two investments that influenced the VAS ETF.

First, as BHP Group Ltd (ASX: BHP) has the biggest allocation in the portfolio, it can affect the Vanguard Australian Shares Index ETF the most.

BHP shares fell 2.8% in April 2024. The biggest news of the month was the ASX mining share's takeover offer for the London-listed Anglo American. The market doesn't seem to like the all-share proposed acquisition. The initial offer was rejected, so an even larger bid will be required to appeal to the Anglo American's board.

Second, the ASX bank share sector also saw painful declines. In April 2024, the Commonwealth Bank of Australia (ASX: CBA) share price dropped 4.8%, the National Australia Bank Ltd (ASX: NAB) share price declined 2.4%, the Westpac Banking Corp (ASX: WBC) share price dropped 0.5% and the ANZ Group Holdings Ltd (ASX: ANZ) share price fell 4.2%.

The banks had rallied in the last few months, so the decline has given back some of the gains.

Analysts recently suggested that CBA shares and the other banks were "too expensive". The increase in share prices happened despite banks facing strong competition and interest rates seemingly remaining higher for longer (which could hurt borrowers and banks' arrears).

Distribution paid

Another thing to keep in mind is that the VAS ETF pays a quarterly distribution, sending the dividends it has received from companies to unitholders.

The Vanguard Australian Shares Index ETF paid its most recent quarterly distribution during April. Paying the distribution has the effect of reducing the value of the fund.

It paid an 84.79 cents per unit distribution on 17 April 2024, which was almost 50% more than the distribution 12 months ago.

The next distribution will probably be paid in less than three months.

VAS ETF unit price snapshot

Over the past 12 months, the VAS ETF has risen around 3%, as we can see on the chart below. This return does not include the income paid.

Motley Fool contributor Tristan Harrison 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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