Vanaguard ETF's in depth

Real Wealth Education


Posted on February 8th, 2016 at 10:49 AM by David Orth



The Vanguard Group is one of the largest investment groups in the world and offers exchange traded funds in a variety of categories. These categories of ETFs include fixed income, property, Australian share and international share ETFs. The Vanguard Group has a growing reputation of being an indexing specialist and are highly regarded.

Two ETFs that Vanguard offer are the Vanguard Australian Property Securities index (VAP) and the Vanguard Australian Government Bond Index (VGB). Through this article, we will look at what the ETF is, its benchmark and how it is currently performing.


The Vanguard Australian Property Securities index (VAP)

The Vanguard Australian Property Securities index (VAP) is an ETF in the property asset class. It was established in March of 1998 and aims to track and match the return of the S&P/ASX 300 A-REIT Index. This looks at the income and capital appreciation of the S&P/ASX 300 A-REIT Index before taking accounting fees, expenses and tax into account.

Exchange traded funds are a low cost was of investing in property securities that are listed on the Australian Securities Exchange (ASX). The property sectors that the ETF invests in include office, retail, diversified and industrial.

The S&P/ASX 300 A-REIT Index that the ETF uses as a benchmark is comprised of property securities that are listed on the ASX. The number of securities in the index may vary. The securities are made up of real estate investment trusts and companies that own real estate assets and derive a substantial proportion of revenue from rental income. The ETF has been performing well when compared with the benchmark.

Performance return

Bmk ETF total Benchmark % ETF Total %
1 year 6.56% 6.44%
3 years (p.a.) 14.31% 14.10%
5 years (p.a.) 14.81% 14.59%

For all of the periods the ETF is only slightly below the security they have benchmarked themselves against. This shows that the ETF is very close to achieving its goal of matching their benchmark.

If you are an investor who wants to buy and hold an ETF, are seeking long term capital growth, tax-effective income and have a high tolerance for the risks that are associated with share market volatility, then this is the security for you.


Vanguard Australian Government Bond Index (VGB)

Vanguard Australian Government Bond Index (VGB) is an ETF that seeks to track and match the return of the Bloomberg AusBond Govt 0+ Yr Index before taking fees, expenses and tax into account. The ETF invests in high quality, income generating securities that are issued by the Australian Government, Australian State Government authorities and treasury corporations. The ETF commenced in December 2008 so it is relatively new compared to other ETFs.

ETFs are low cost and also provide a degree of protection against capital volatility. The investments in the ETF are mostly rated AA or higher by Standard & Poor’s ratings agency or equivalent agency. These are very positive ratings and show that the investments are stable.

The VGB is benchmarked against Bloomberg AusBond Govt 0+ Yr Index (BAGV0). This benchmark has been created to measure the market of Australian Government bonds and is a composite of the treasury and Semi-Government indices. It includes bonds maturing in 0+ years and is a rule-based, market value weighted index. The ETF is performing quite well and tracking its benchmark well. Over the years it has slowly been improving and the last month’s performance results shows it is on par with the BAGV0.

Performance return

Bmk ETF total Benchmark % ETF Total %
1 month 1.22% 1.22%
3 months 2.93% 2.90%
6 months 2.51% 2.44%
1 year 3.06% 2.93%
3 years (p.a.) 5.42% 5.28%

These figures are very promising and show that the ETF is achieving the goal of matching its benchmark.

If you are an investor with a medium term investment horizon who is seeking a steady and reliable income stream then the Vanguard Australian Government Bond Index exchange traded fund is for you.


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