Considering 86% of Australian active fund managers have failed to outperform the S&P/ASX 200 benchmark over a 15 year period, a simple, mostly passive investment strategy is vastly superior for most people. As Warren Buffett said, “paradoxically when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.”
Fortunately for Aussie investors, Betashares, and Vanguard recognised a gap in the market for a passive, ‘hands off’ investment option and proceeded to create ‘all in one’ ETFs. This article aims to provide unpack the facts and features of each option.
Before reading any further, please ensure you’ve read and clearly understand my financial disclaimer located at the bottom of this post.
Want to know more about the basics of ETFs?
If you’d like to freshen up on the nuts n’ bolts of ETFs before I dive into my DHHF vs VDHG analysis, here’s a link to an investing basics article I wrote about the 6 things you should understand about an ETF before investing.
You can skip ahead to a certain part of the article using the links below ⬇️
- What are all in one Funds?
- Are all in one funds: Pro’s & Cons
- Betashares DHHF ETF Review (ASX:DHHF)
- Vanguard VDHG ETF Review (ASX:VDHG)
- Price – DHHF vs VDHG
- Asset Allocation: DHHF vs VDHG
- Regional Exposure: DHHF vs VDHG
- Performance: DHHF vs VDHG
- Currency Exposure: DHHF vs VDHG
- Tax Considerations: DHHF vs VDHG
- DHHF vs VDHG – Key Fact Comparison Table
- Jesse’s Verdict: DHHF vs VDHG?
- Financial Disclaimer
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What are all in one funds?
An all in one fund is essentially a fund of funds (sorry for the tongue twister). They can group together both growth, and defensive assets through several ETFs, index funds or managed funds within the one fund that can be accessed through an online broker. There is a variety of different all in one funds out there that aim to achieve different things. Here’s an example asset allocation of an all in one fund.
Thanks to the all in one funds, investors can take ownership of varying asset classes, multiple ETFs and thousands of companies across the globe. Wait for it. In one trade!
All In One Funds – Pros & Cons
The concept of an all in one fund is fantastic, but they’re not for everyone. Here are a few pros and cons to bring you up to speed ⬇️
Pro – Straightforward & Diversified
The beauty of all in one funds is that they’re designed to remove the human from the investing process as much as possible. All you need to do is make one transaction to be diversified across regions, and asset classes without any overlap. Owning one ETF can also translate to less brokerage fees.
Pro – No Need To Re-Balance
Another attribute of the all in one fund is that all rebalancing where necessary is done by the fund provider, which means you don’t have to! This is handy because it can help prevent a potential capital gains tax event should you need to sell down an overweight holding.
The rigidity may also protect you from yourself! For example, if there’s short term negativity around US shares specifically, investors might be tempted to sell a US-specific ETF. With an all in one fund, there’s no capability for the investor to make any active portfolio management decisions.
Con – Rigid
Either fund offers any room to shake things up. Given the underlying funds within each ETF are determined by the ETF provider, you’ll have no flexibility in managing your asset allocation to suit your preferences (assuming you don’t have other holdings).
Con – Fees
Both DHHF and VDHG aren’t expensive by any stretch. However, for the convenience they provide, you’ll pay a slightly higher fee compared to owning each underlying holding individually. For example, A200 and VTS (VTS CDI), are more cheaply held outside of DHHF.
Combined, A200 and VTS would cost 0.05% p.a held individually*, and 0.19% p.a held within DHHF.
*Assumes an equal weighting distribution (50/50)
BetaShares DHHF ETF Review (ASX: DHHF)
Betashares DHHF provides investors seeking un-hedged exposure to higher growth assets with a simple way to access both local, and international equities. DHHF is a relatively new challenger in the all in one fund market, after listing in 2019 as an alternative to VDHG.
DHHF boasts a 100% weighting towards shares, suitable for investors with a longer-term, high-growth focus. It tracks four broad-based passive ETFs, with each holding US, Australian, Developed Markets (excl. US), and Emerging Market shares. That translates to exposure to over 8,000 small, medium and large size companies, across 60 countries.
Each ETF held within DHHF tracks a different geographical area, with no overlap. Interestingly, three of the four are not managed by Betashares, nor are they listed in Australia! This has certain tax implications that I’ll touch on shortly.
Neither DHHF nor VDHG perform are ethically geared. For those interested in an ESG focused all in one ETF, Betashares offer not one, but three alternatives to DHHF.
|ASX Code||ETF Provider & Name||Management Fees|
|DBBF||BetaShares Ethical Diversified Balanced ETF||0.39% p.a|
|DGGF||BetaShares Ethical Diversified Balanced ETF||0.39% p.a|
|DZZF||BetaShares Ethical Diversified Balanced ETF||0.39% p.a|
Want to know more about DHHF?
Check out the DHHF fact sheet if you’re keen on doing some further reading on DHHF.
Vanguard VDHG ETF Review (ASX: VDHG)
After listing in 2017, VDHG became Australia’s first all in one fund. VDHG mostly provides investors with broad exposure to small, medium and large capitalisation equities located both locally and internationally. Unlike DHHF, VDHG also invests in income assets (bonds) through a suite of Vanguard managed funds. Vanguard targets an asset allocation of 90% shares, and 10% bonds for VDHG.
Each of VDHGs seven currency-hedged, and un-hedged underlying holdings are unlisted index funds managed by Vanguard directly. All seven funds combined provide investors exposure to over 18,000 securities!
Vanguard’s unlisted index funds can be likened to their ETF cousins. Although similar in more ways than one, there are slight differences between the two products including their accessibility, pricing and trading flexibility that you should be aware of. This article from Vanguard explains these in detail if you’re curious! There are also tax implications with unlisted index funds worth considering (more on those later).
What I’ve Been Reading
Interestingly, VDHG is benchmarked against the long-standing Vanguard High Growth Index Fund, which is the unlisted index fund equivalent of VDHG.
Want to know more about VDHG?
Check out the VDHG fact sheet if you’re keen on doing some further reading on VDHG.
DHHF VS VDHG – Which Is Cheapest?
With an MER of 0.19%, DHHF takes the cake on the cost front by providing investors with an 0.08% discount to VDHGs MER of 0.27%. Although DHHF is cheaper, It’s impossible to compare apples with apples considering DHHFs attributes can’t be compared like with VDHG. Here’s what I mean.
|International Shares Fund||Yes||Yes|
|Australian Shares Fund||Yes||Yes|
|Emerging Markets Fund||Yes||Yes|
|Small Companies Fund||No||Yes|
|Currency Hedged Funds||No||Yes|
Unlike DHHF, VDHG provides exposure to bonds, as well as equities. It’s also specifically invested in currency-hedged, and small company funds. Considering DHHF and VDHG are far from identical in terms of their underlying holdings, the slight variance in fees isn’t a total shock.
In my view, the difference in fees between DHHF and VDHG isn’t a deal-breaker if you’re starting small. If you’ve got a larger pool of capital to invest, the variance becomes more considerable.
$10,000 or $1,000,000 Invested in DHFF or VDHG would cost you
For context, Betashares would take $19 for every $10,000 invested in DHHF, and Vanguard would take $27 for every $10,000 invested in VDHG. These fees are excluding bid/ask spread fees.
For the higher rollers out there, Betashares would take $1,900 for every $1,000,000 invested in DHHF, and Vanguard would take $2,700 for every $1,000,000 invested in VDHG. These fees are excluding bid/ask spread fees.
Both ETFs have slightly different strategies and aren’t a straight swap. Should DHHF or VDHG align more closely to your risk profile, investing horizon and asset allocation preferences then either one may be worth considering it. Should you choose to liquidate a position in one ETF to purchase another, be mindful of triggering a capital gains tax event prior to selling.
Do all in one funds charge fees like other ETFs?
Just like other ETFs, all in one, ETFs deduct their fees based on the Net Asset Value (NAV), which is the market value of the ETF’s underlying assets.
Asset Allocation: DHHF vs VDHG?
The headline difference between DHHF and VDHG from an asset allocation perspective is their exposure to bonds. VDHG with 10%, and DHHF with 0%.
Shares vs Bonds, what’s the difference?
Owning shares gives you partial ownership in a company, whereas bonds are a loan from you to a government or company.
Compared to shares, bonds are generally less volatile. That means they’re great at adding ballast to a portfolio during periods of share market volatility. On the other hand, bonds generally lag the performance of shares during bull markets.
For investors with a shorter investing horizon or less tolerance to volatility, bonds can offset the risk of capital losses. That’s why Betashares recommend DHHF for investors with “a very high tolerance for risk.”
|As of 31/01/2022||DHHF||VDHG|
|International Shares – Developed World||56%||49%|
Although VDHGs target a 10% allocation towards fixed income, its remaining allocation towards shares still places it on the growth end of the spectrum according to Vanguard, who recommend VDHG for “investors with a high tolerance for risk who are seeking long-term capital growth.”
Regional Exposure – DHHF vs VDHG
DHHF and VDHG share a relatively similar regional exposure profile. Considering VDHG has a 10% allocation to bonds, it’s slightly less concentrated towards Australian, international and emerging market shares.
Both ETFs are also similar from a country-specific exposure perspective. DHHF and VDHG are heavily weighted towards US companies, home to 8 of the 10 largest organisations in the world. Their allocations are 38.4%, and 34.3% respectively.
DHHF & VDHG Have A Heavy Weighting Towards Australian Shares
Interestingly both are also heavily weighted towards Australian shares (30%+). Personally, I’ve always been hesitant to overexpose my portfolio to Australian focussed ETFs largely to avoid ‘home bias’. Please keep in mind that this is my personal preference, and is not intended to influence your decisions.
The Aussie share market is a very small fish, in a very large pond. Considering both DHHF, and VDHG were created on the principle of broad diversification, It’s intriguing that both providers have chosen to concentrate over 30% of each of the ETFs weighting into one market that holds 2% of global sharemarket value.
Don’t get me wrong, I’m proud of our Aussie companies, especially those dominating the healthcare space. However, if it’s broad, international diversification you’re looking for, it’s important to consider DHHF and VDHG have significant exposure to Australian shares. Unfortunately, the rigidity of and all in one fund means an investor’s asset, and regional diversification is at the discretion of the ETF provider.
DHHF vs VDHG – Performance
IMHO, neither ETF has been listed long enough to reasonably compare their performance with each other. Usually, I prefer to assess an ETFs performance over a 5+ year horizon to ensure its behaviour over an extended period of the market cycle is considered.
At the time of writing, both ETFs have only been listed long enough to compare one full year of performance. In 2021, DHHF returned 17.57%, and VDHG returned 14.03%*. DHHFs 100% allocation to equities strategy clearly benefited from a stellar year for global developed market shares, while VDHGs performance was likely sandbagged by its exposure to low yielding income assets.
|As of 31/01/2022||ASX: DHHF||ASX: VDHG||Vanguard High-Growth Index Fund||ASX: IVV (S&P500)|
*dividends reinvested, after fees.
Thankfully, there are other ways to compare the performance of DHHF and VDHG.
VDHGs benchmark fund has been listed for over 10 years, which provides an interesting opportunity for comparison against the world’s most widely tracked equities index, the S&P 500. Over a 1, 3, 5 and 10 year period the US large-cap shares index has outperformed VDHGs benchmark.
This is for two main reasons:
- The S&P 500 outperformed Vanguard’s High Growth Index Funds underlying international share indexes between 2012-2022.
- The S&P 500 outperformed Vanguard’s High Growth Index Funds underlying bond indexes between 2012-2022.
Considering the similarities in asset allocation between DHHF, and VDHG, DHHFs exposure to non-US listed shares would have also resulted in underperformance compared to the S&P 500.
Don’t get me wrong, I’m not suggesting you bet the house on the S&P 500. There have been periods throughout history where the S&P 500 has lagged other markets. My point is that diversifying broadly will by definition mean that other asset classes, regions, indices or companies will both outperform, and underperform an all in one fund.
Currency Exposure – DHHF vs VDHG
Another key difference between DHHF, and VDHG is their exposure to hedged funds. Unlike DHHF, VDHG holds a currency-hedged international bond fund (7%), and an international share fund (16.2%).
Currency hedging is not too dissimilar to owning bonds to protect against share market volatility. The only difference is currency diversification is intended to protect against currency fluctuations.
Developed market currency fluctuations between countries sit firmly outside our control. Research suggests Investors investing over the long term will see that any currency fluctuations usually come out in the wash over time assuming base currencies remain relatively stable.
Is hedging worth it?
Hedging can suit investors with shorter-term investing horizons or investors interested in reducing currency fluctuation uncertainty.
This article breaks down the pros, and cons of currency hedging in greater detail.
Tax Considerations – DHHF vs VDHG
Time to touch on everyone’s favourite topic. As I mentioned earlier, owning DHHF or VDHG will have slightly different tax implications.
VDHG – unlisted fund tax considerations
Units of unlisted index funds like those within VDHG are traded between the investor, and index provider. When units are sold by one investor, a capital gains event is triggered for all unitholders. Capital gains are added to the fund’s overall distribution, increasing the associated taxation. ETFs on the other hand are bought, and sold on a stock exchange through market makers. That means the capital gains burden is typically worn by the market maker, not the investor. The tax drag of this quirk is amplified with larger holdings. Morningstar illustrates this in detail here.
Essentially there is a case to argue that DHHF should be more tax-efficient in the long run because its distributions won’t be an amalgamation of capital gains, and dividends. Tax implications will also be dependent on the performance of each ETF.
DHHF – tax drag
Interestingly, DHHF has some tax quirks of its own. Because two of its underlying ETFs (SPDW & SPEM) are US-domiciled, and consist of international shares, DHHF incurs a tax drag. This is because the double taxation treaty cannot be used to offset additional withholding tax for ETFs that:
- Hold non-Australian domiclied funds domiciled outside Australia and;
- those funds hold assets from outside the country of domicile.
All in all, this resulted in a slight reduction of 0.08% to DHHFs total return.
DHHF vs VDHG Key Facts
Use this table to compare all the juicy nuggets of information about DHHF and VDHG.
|As of 31 Jan 2022||DHHF||VDHG|
|Asset Class(s) Invested In||Equities||Equities & Bonds|
|Underlying Fund Structure||ETFs||Indexed Managed Funds|
|Management Fee||0.19% p.a.||0.27% p.a.|
|Dividend Reinvestment Plan||Applied automatically, unless opted out.||Yes, opt-in is required to participate.|
|Dividend Yield (TTM)||2.9%||7.1%|
|Income Distribution Frequency||Quarterly||Quarterly|
|ETF Inception Date||Dec-20||Nov-17|
|1 Yr Return p.a.||17.57%||14.03%|
|3Yr Return p.a.||N/A||12.55%*|
|Return Since Inception p.a.||15.07%||9.67%*|
|Funds Under Management (FUM)||$144.8M||1.61Bn|
|Number of Holdings||8,000 (approx.)||Shares: 7,525 (approx.)Bonds: 10,976 (approx.)|
|Number of Underlying ETFs/Managed Funds||4||7|
|Underlying ETFs/ Managed Fund (Concentration)||US Shares – NYSE: VTI (37%), Australian Shares – ASX: A200 (36%), Developed World Ex-US: Shares: NYSE: SPDW (20%), Emerging Market Shares – NYSE: SPEM (6%)||Shares: Vanguard Australian Shares Fund (36%), Vanguard International Shares Fund (27%), Vanguard International Shares Fund (AUD Hedged) (16%), Vanguard International Small Companies Fund (6%), Vanguard Emerging Market Shares Index Fund (5%)|
Bonds: Vanguard Global Aggregate Bond Fund (7%), Vanguard Australian Fixed Interest Fund (3%)
*After fees, dividends are reinvested.
Jesse’s verdict: DHHF vs VDHG
Both Vanguard and BetaShares have done an impeccable job simplifying the investing process for investors through VDHG, and DHHF.
I don’t personally own ETF largely because of their large allocation to Australian shares, and because I’d prefer greater flexibility to be more active with my asset allocation.
Considering I’m at the very beginning of my investing career, my preference is to accumulate high-growth assets as opposed to focussing on capital preservation. As a consequence, I’m willing to accept extreme volatility in exchange for a larger total return (capital growth + dividends) when measured over the long term. Remember, just because I’m comfortable with this approach, it doesn’t automatically make it right for you.
DHHFs 100% allocation to equities, aligns more closely with a ‘high-growth’, long term strategic asset allocation.
For those without as much of a stomach for volatility, or who would prefer to build an income focussed portfolio VDHG would be worth considering.
Both ETFs seem similar at the surface level, however, there are important differences that need to be considered against your specific investment strategy.
Want to see more articles like this? You can sign up for my newsletter to get free content first by e-mail! If you’re after some more ETF comparisons, check out all my other articles comparing the best Aussie ETFs.
About The Writer
Hi, I’m Jesse, but you can call me Jes for short. My passion is simple, I’m on a mission to make the world of investing easily understood by removing the ‘too hard basket’ stigma that surrounds it. P.S. I’d love to meet you on Twitter or Insta or both.
Disclaimer: The information provided in this article is general in nature only and does not constitute personal financial advice about how you should manage your investments. In this article, I intend to provide factual, balanced information without judgment or bias, to the best of my ability. My financial decisions (or use a particular service or platform) are personal choices based on their specific circumstances and do not automatically make them appropriate for your personal circumstances. I do not recommend nor endorse any financial or investment product. My usage or opinion of any product should not be interpreted as an endorsement, advertisement, or intent to influence. I cannot and will not make a guarantee about the performance of any product, and although I strive to keep information on this website accurate and updated as it changes, I make no guarantee about the correctness of reviews or information posted. I am NOT a financial advisor and do not hold an AFSL. You should also consider seeking the advice of an investment advisor who holds an Australian financial services (AFS) licence or is a representative of an AFS licensee. Be sure to work with someone who understands your investment objectives and tolerance for risk. Your investment advisor should understand these products, be able to explain whether or how they fit with your objectives and be willing to monitor your investment alongside you. You can find a financial advisor by visiting the ASIC financial adviser register and searching for one in your local area.