Key Highlights

  • The fund is one of the larger Australian bond ETFs by size, at about $3.98 billion.
  • The fund holds 848 companies and issuers, with the top ten representing 23.15% of the portfolio.
  • The management fee is 0.10%, and the listed annual Yield is 3.44%.
  • Australian issuers make up 86.18% of the portfolio, with bonds accounting for 98.74%.

Vanguard Australian Fixed Interest index ETF (ASX:VAF) tracks the Bloomberg AusBond Composite 0+ Year Index, holding a broad mix of Australian government and corporate bonds. The units were listed at $45.48, the fund size is about $3.98 billion, and the management fee is 0.10%. The fund's wide holdings base makes it a straightforward way to hold Australian fixed income in a single product.

Ticker

ASX:VAF

Listed price

$45.48

Fund size

$3.98 billion

Management fee

0.10%

Listed annual yield

3.44%

Benchmark

Bloomberg AusBond Composite 0+ Yr

Holdings

848 companies

How the portfolio is built

Vanguard selects holdings based on liquidity, market access, Cash Flow needs and minimum trade sizes, aiming to track the index with a representative sample of securities. Bonds make up 98.74% of the fund, with cash at 1.26%.

Australia accounts for 86.18% of the portfolio, followed by supranational issuers at 4.46%, Canada at 2.62% and Germany at 1.85%. The top ten holdings make up 23.15%, with the largest positions being Australian Commonwealth Government Bonds at around 2% to 2.6% each.

Income and costs

The listed annual yield is 3.44%, and the management fee is 0.10%. Turnover is reported at 10.79%, which suggests the portfolio is adjusted only modestly over time.

Because the fund holds both government and corporate issuers, its income sits between the lower yield of government-only funds and the higher yield of credit-focused products.

Risks to weigh

Interest rate risk is the main concern. When rates rise, the unit price can fall, and longer-dated holdings are more affected. Credit spreads matter as well, since the corporate part of the portfolio can lose value during periods of stress. Because the fund tracks an index, it will hold bonds even when individual issuers face difficulties.

Investors should also note that the listed yield is not a guaranteed return and can change as the portfolio and market conditions shift.

Final Word

The Vanguard Australian Fixed Interest Index ETF offers a broad, low-cost way to hold Australian government and corporate bonds in one product. Its unit price will continue to respond to interest rates and credit conditions, which remain the main factors for investors to weigh.