Key Highlights

  • Vanguard Australian Fixed Interest index ETF (ASX:VAF) is the largest of the three at about $3.98 billion, with a fee of 0.10%.
  • iShares Core Composite Bond ETF (ASX:IAF) charges 0.10% and shows a listed Yield of 3.18%.
  • Betashares Australian Composite Bond ETF (ASX:OZBD) has the highest listed yield at 4.67% and a fee of 0.19%.
  • Each fund holds more than 740 issuers, with the top ten making up 10% to 23% of the portfolio.

Three broad Australian bond ETFs cover much the same ground in different ways: iShares Core Composite Bond ETF (ASX:IAF), Vanguard Australian Fixed Interest Index ETF (ASX:VAF) and Betashares Australian Composite Bond ETF (ASX:OZBD). All three hold large numbers of government and corporate bonds, but their weightings, fees and listed yields differ. This article sets out those differences to help readers see how the three compare.

Measure

ASX:IAF

ASX:VAF

ASX:OZBD

Listed price

$101.43

$45.48

$43.46

Fund size

$3.76 billion

$3.98 billion

$1.61 billion

Management fee

0.10%

0.10%

0.19%

Listed annual yield

3.18%

3.44%

4.67%

Holdings

750

848

742

Australian exposure

86.99%

86.18%

67.49%

How the portfolios are built

ASX:IAF tracks the Bloomberg AusBond Composite 0+ Year Index, while ASX:VAF tracks the same index using a representative sample chosen for Liquidity and trade size. ASX:OZBD tracks the Bloomberg Australian Enhanced Yield Composite Bond Index, which tilts toward supranational and corporate issuers that pay more than Commonwealth bonds.

The result is that ASX:IAF and ASX:VAF are closer to a standard Australian Bond Market holding, while ASX:OZBD carries more international and enhanced-yield exposure, with supranational issuers at 11.82%.

Costs and yields

ASX:IAF and ASX:VAF both charge 0.10%, the lowest fee in this group. ASX:OZBD charges 0.19%, which is higher, but its listed yield of 4.67% is also higher than the 3.18% and 3.44% shown by the other two.

The yield gap reflects the portfolio mix rather than a difference in risk appetite alone. Investors comparing the three should weigh the extra income of ASX:OZBD against its higher fee and wider issuer range.

Risks to weigh

All three funds are sensitive to interest rates, and their unit prices will fall when yields rise. Longer-dated holdings respond more than shorter ones, and the three funds include a mix of maturities. The corporate and supranational holdings in ASX:OZBD and ASX:VAF add Credit risk and, for offshore issuers, currency considerations.

Because all three are broad index-style products, none removes market-wide pressure on bond prices. Their differences lie mainly in how much credit and international exposure they carry.

Final Word

The three composite funds offer broad Australian bond exposure with different balances of fee, yield and international weighting. ASX:IAF and ASX:VAF sit closer to the standard Australian market at a low fee, while ASX:OZBD offers a higher listed yield through a wider issuer mix and a higher fee.