3 different Vanguard ETFs for Aussie share exposure
All 3 ETFs have earned a Bronze Medalist Rating from our analysts.
Vanguard MSCI Australian Large Coms ETF (ASX: VLC): Concentrated exposure to Australia’s largest companies at a cost-effective price
Vanguard implements a full replication approach of the MSCI Australian Large Companies Index, with security weights approximately in the same proportion as the index; however, small deviations may occur at times when balancing the trade-off between tracking error and trading costs. For example, trading around index changes may be delayed if stock prices are believed to be unduly distorted by index changes. This approach has been beneficial to this strategy, keeping tracking error and turnover within a tight margin while minimizing the cost to investors.
The fund aims to track the MSCI Australian Large Companies Index, a free-float-adjusted, market-cap-weighted index that looks to capture the top 70% of the free-float market. As of September 2025, there are 17 securities in the index. As a result, the portfolio is highly concentrated, with more than 83% in the top 10 holdings.
Commonwealth Bank of Australia is the largest stock by market capitalization in Australia, accounting for 18.4% of the index, closely followed by BHP at 14.2% as of September 2025. The index’s heavy allocation to banks results in a pronounced tilt toward financial services, comprising about 47% of the portfolio. Basic materials also feature prominently at around 19%. Positively, the index has recently seen the inclusion of its first information technology stock, Wisetech Global, adding a minor amount of diversification.
Vanguard Ethically Cnscs Aust Shrs ETF (ASX: VETH): This strategy delivers broad Australian equity market exposure with an ESG overlay
Vanguard uses an index-replication approach to track the FTSE Australia 300 Choice Index, a derivative of the FTSE Australia 300 Index. The choice index excludes companies involved in activities such as fossil fuels, nuclear power, alcohol, tobacco, gambling, weapons, and adult entertainment. Additionally, a screen is applied to filter out names embroiled in severe controversies. In early 2025, the index underwent a minor change to the screening approach of fossil-fuel-related business, which shifted the definition from an industry classification approach to a revenue-based threshold. While the change saw some additional exclusions, there was a minimal impact on the characteristics of the portfolio.
The strategy attempts to hold all securities in the FTSE Australia 300 Choice Index at approximately the same weights. However, temporary deviations from the index may occur to reduce transaction costs. Buffer rules are applied to minimize portfolio turnover at quarterly rebalancing dates. Over the long term, the strategy’s returns are expected to broadly track the Australian share market, with occasional short-term deviations from the ESG overlay.
The portfolio remains representative of the broad Australian market, despite the exclusion of some domestic stocks. Large corporations, such as BHP, are excluded from the portfolio, resulting in a slightly higher allocation to mid- and small-cap stocks compared with the category index and broader domestic market indexes. As a result, the portfolio has exhibited a modest growth tilt.
To help ensure the portfolio remains representative of the broader market, the index has capped industry allocations to be plus or minus 5% relative to the parent index (FTSE Australia 300). Although the exclusion removes some companies from the opportunity set, the portfolio continues to be diversified, comprising over 200 companies as of September 2025. About 50.8% of the portfolio is held in the top 10 holdings, versus 47.1% in Morningstar’s Category Index.
Vanguard Australian Shares ETF (ASX: VAS): Delivers passive exposure to the Australian equity market at a low price
Vanguard Australian Shares employs a full index-replication approach to track the S&P/ ASX 300 Index. The strategy attempts to hold all securities in approximately the same proportion of the index’s weightings; however, small deviations may occur at times when balancing the trade-off between tracking error and trading costs. For example, trading around index changes may be delayed if stock prices are believed to be unduly distorted by index changes. Similarly, the index’s smallest, most illiquid stocks may be excluded if the transaction cost associated with buying them exceeds the tracking error associated with omitting them.
This approach has been beneficial to this strategy, keeping tracking error and turnover within a tight margin while minimizing the cost to investors. Additionally, Vanguard engages in securities lending to add incremental value, a point of differentiation from many peers. The entire net revenue after fees from securities lending is returned to investors, providing an additional lever to enhance returns. This process is conducted prudently and in a risk-aware manner, requiring high-quality collateral to be held in excess of the value of the lent securities.
The strategy aims to track the S&P/ASX 300 Index before taking into account fees, expenses, and tax. The S&P/ASX 300 Index is a free-float-adjusted market-cap-weighted index that provides exposure to approximately 300 of Australia’s largest companies and is rebalanced semiannually in March and September. The index is concentrated from a sector perspective, with allocations to financials and materials making up approximately 33% and 20%, respectively, as of September 2025.
The portfolio is top-heavy with the top 10 holdings comprising about 46% of assets as of September 2025, including Commonwealth Bank of Australia, BHP Group, Westpac Banking, and National Australia Bank. Consequently, the portfolio has a pronounced tilt toward cyclical and economically sensitive sectors, combined with the domestic earnings focus of many large Australian companies, results in a meaningful correlation with local economic activity.
