The Vanguard Australian Property Securities Index ETF (ASX: VAP) is one of the larger exchange-traded funds (ETFs) in Australia.
It gives investors exposure to the commercial property sector by investing in real estate investment trusts (REITs) within the S&P/ASX 300 Index (ASX: XKO). The ASX ETF is approximately $3 billion in size and has 33 holdings.
There are a couple of reasons why this ASX ETF could be a good way to invest in property. Let's take a look.
Diversification
The VAP ETF is invested in several property sectors, including industrial, retail, office, self-storage, healthcare, hotels, farming, and more.
The larger the business, the greater its weighting in the Vanguard Australian Property Securities Index ETF portfolio.
I'll point out that one REIT owns a portfolio of properties, which is much more diversified than a single residential property. This ASX ETF owns a portfolio of REITs, so there are a lot of underlying properties.
At 31 May 2024, these were the biggest 10 positions:
- Goodman Group (ASX: GMG) – 37.9%
- Scentre Group (ASX: SCG) – 10.7%
- Stockland Corporation Ltd (ASX: SGP) – 7%
- GPT Group (ASX: GPT) – 5.2%
- Mirvac Group (ASX: MGR) – 5%
- Vicinity Centres (ASX: VCX) – 4.9%
- Dexus (ASX: DXS) – 4.75%
- Charter Hall Group (ASX: CHC) – 3.75%
- National Storage REIT (ASX: NSR) – 1.85%
- Region Re Ltd (ASX: RGN) – 1.6%
At the end of May 2024, it included three REIT sectors with large weightings: industrial REITs (39.5% of the portfolio), diversified REITs (24%), and retail REITs (23.9%).
Low costs
One of the main advantages of choosing a Vanguard ETF is that they usually have low management fee costs. Low expenses mean more of the returns stay in the hands of investors.
According to Vanguard, the VAP ETF has an annual management fee of 0.23%.
My 2 cents on this ASX ETF
I think it's an effective investment for people wanting exposure to the property market through REITs.
It hasn't exactly shot the lights out. Over the past ten years, the VAP ETF has returned an average of 9.3%, with 5.2% of that being a distribution return.
It is a decent option for passive income but may not produce much capital growth because of the relatively low rental growth of some of the underlying businesses. If investors prefer a particular sub-sector, they could just go for a specific REIT such as Goodman or Scentre.
