The most popular ETFs in SMSFs
A look into the funds Aussie investors are backing.
Mentioned: Vanguard Australian Property Secs ETF (VAP), Vaneck Msci International Quality Etf (QUAL), Goodman Group (GMG), Vanguard Australian Shares ETF (VAS), iShares S&P 500 ETF (IVV), Vanguard MSCI Intl ETF (VGS)
The Class Annual Benchmark Report for 2025 has arrived, offering fresh insights into the evolving SMSF landscape. This year’s standout finding is the ongoing expansion of the SMSF sector, with investors seemingly undeterred by the looming challenges presented by the Division 296 tax.
SMSF establishments surged in FY25, with total funds rising 6.4% in the year. Notably, this marks the highest gross fund establishment rate since 2017.
Direct Aussie shares remained the most popular investment representing almost 30% of total assets. Unsurprisingly, direct property came in second place, although down slightly from the previous financial year. ETFs were the only asset class to grow in popularity, with their presence across SMSF portfolios increasing 1.3% year-on-year.
The below table outlines the top 20 ETF holdings by popularity:
I’ve previously covered VAS, IVV and VGS, so today I’ll be looking at VanEck’s MSCI International Quality ETF QUAL and Vanguard’s Australian Property Securities Index ETF VAP.
Vanguard Australian Property Securities Index ETF VAP
Methodology and composition
The fund tracks the ASX 300 A-REIT Index, typically holding all constituents but slight deviations may occur to minimise trading costs.
Given the Australian REIT market is smaller in size and scale than other developed markets, the index is composed of only 30 constituents as of September 2025. Despite this, it is well representative of the opportunity set, covering ~97% of the market cap of the sector.
The strategy provides reasonable subsector diversification relative to other sector indexes; with around a 50% split of assets across industrial and retail REITS. However, it does carry a fair degree of stock-level concentration. The top 10 holdings account for around 85% of portfolio assets, with property heavyweight Goodman Group taking top spot at ~36% of net assets.
Top ten holdings of VAP ETF. Author visualisation. Data as of Aug 2025.
Consequently, a firm exiting the underlying index could cause notable portfolio shifts. Given the strategy’s passive nature, there is no explicit downside protection in such events. Despite that, given active strategies do not stray far from the index, they are unable to offset this concentration risk meaningfully.
Due to the smaller REIT market, the portfolio’s overall characteristics align with the category average, as active managers do not stray far from benchmark weightings. Thus, there are narrow levels of return dispersion within the category.
Performance and costs
The low management fee of 0.23% makes the overall holding cost attractive. We also find this strategy has rewarded investors well overtime. From its inception through September 2024, the fund has delivered standout performance, establishing a tough hurdle for active managers to beat.
Growth of $10,000 investment in VAP since inception. Data as of 08 Aug 2025. Source: Morningstar.
The fund has consistently surpassed the category average across three, five and ten year trailing periods. The key driver to this has been the large exposure to Goodman Group which has consistently been the top company in the portfolio.
VAP ETF trailing returns. Month end as of 30 Sept 2025. Source: Morningstar.
Low interest rates are generally supportive of the REIT sector. For the past decade, the RBA’s extended easing efforts have elongated the growth runway. However, the raising of interest rates beginning 2022 resulted in valuations coming under increased scrutiny and subsequently, a difficult period for the sector. As rate uncertainty subsided through 2023, the Australian real estate market has rebounded strongly.
Bottom line: This fund is an excellent passive vehicle to gain access to the domestic listed property sector. The strategy maintains its top ranking in the Australia real estate Morningstar Category.
VanEck MSCI International Quality ETF QUAL
Methodology and composition
The ETF tracks the MSCI World ex Australia Quality Index through a full replication approach. The benchmark is based on its parent index MSCI World ex Australia, which features large and mid-cap stocks across 22 developed countries.
The strategy aims to capture high-quality growth stocks by screening the parent index on three variables: high return on equity, stable earnings growth, and low financial leverage. The top 300 ranked securities are chosen from the parent index pool which comprises ~1,200 names.
This approach results in a portfolio with notable differences to the MSCI World ex Australia Index. Firstly, there is a tilt toward more large-cap growth names, and a skew to sectors such as technology (33% vs 26% category average) and healthcare (15% vs 11% category average), whilst financials are underweight (9.5% vs 17% category average). The top ten holdings currently account for around 38% of net assets.
Top ten holdings of QUAL ETF. Author visualisation. Data as of Oct 2025.
The sector skew has also led to an increased geographic exposure to the US at 80% of the portfolio (as of October 2025) vs the category average of 69%. We don’t think this is a specific risk, given the underlying holdings are generally mega-cap multinationals, generating a substantial part of their revenues outside the US.
This composition appears a sensible diversification option for an Australian investor’s equity exposure, given the domestic market is dominated by financial and materials.
Performance and costs
At a 0.40% management fee, QUAL is significantly cheaper than the average active strategy. It has also delivered stellar performance since inception. Paired with the quality-growth orientation of the portfolio, the limited exposure to small and mid-caps have been the prime drivers of long-term outperformance vs the category.
Growth of $10,000 investment in QUAL since inception. Data as of Oct 2025. Source: Morningstar.
QUAL ETF trailing returns. Month end as of 30 Sept 2025. Source: Morningstar.
Quality traits are expected to be more resilient during distressed market and high-volatility conditions, leading to outperformance. We see evidence of this with QUAL’s impressive performance in choppy markets like the 2020 Covid-induced selloff (delivered 11% vs category average of 6%). This is a testament to the underlying quality growth factor theme of the strategy. The fund’s risk-adjusted return is also notable, with the trailing ten-year return ranking high within its category.
Bottom line: In seeking high-quality global equities at a low cost, QUAL is a solid investment proposition for passive global exposure to the quality factor.
Medalist rating and valuation
The Morningstar Medalist Rating is a forward-looking analysis that aims to predict funds’ performance versus a relevant benchmark index or peer group. The three pillars of people, process and parent are used to evaluate ETFs.
Morningstar expresses the Medalist Rating on a five-tier scale running from Gold to Negative. Higher ratings denote our conviction in a fund’s ability to outperform and lower ratings indicating a lack of conviction.
The top three ratings of Gold, Silver, and Bronze all indicate that our analysts expect the investment vehicle to add value or “positive alpha” over the long term when compared with a relevant category index after accounting for fees and risk. Positive alpha simply means to outperform other ETFs in the category.
VAP and QUAL respectively score Gold and Bronze by the Medalist rating, meaning we have conviction that the share class will be able to deliver positive alpha vs other ETFs in the category.
Applying our equity research share level valuations to the underlying holdings shows that VAP screens 1.06 price/fair value (September 2025), whilst QUAL screens 1.01. This indicates both funds currently trade close to fair value.
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It is important to note that any asset class should be considered as part of a well-defined investment strategy. For a step-by-step guide to defining your investing strategy, read this article by Mark LaMonica.
