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 offers insights into the evolving SMSF landscape. Last year’s standout finding was 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, QUAL, IVV and VGS, so today I’ll be looking at Vanguard’s Australian Property Securities Index ETF VAP.
Vanguard Australian Property Securities Index ETF (ASX: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 December 2025. Despite this, it is well representative of the opportunity set, covering ~95% of the market cap of the sector.
The strategy provides reasonable sub-sector 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 84% of portfolio assets, with property heavyweight Goodman Group taking top spot at ~35% of net assets.
Top ten holdings of VAP ETF. Author visualisation. Data as of March 2026.
Consequently, a firm exiting the underlying index could cause notable shifts to the portfolio. Given the strategy’s passive nature, there is no explicit downside protection in such events. Despite that, since 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 management fee of 0.23% makes the overall holding cost attractive. This strategy has rewarded investors well overtime. From its inception through Feb 2026, 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 20 April 2026. Source: Morningstar.
The strategy has consistently surpassed the category average across the five, ten and fifteen-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. Although the weighty allocation to Goodman has been a significant contributor to returns historically, performance has recently lagged the peers.
VAP ETF trailing returns. Month end as of 31 March 2026. 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 a great passive vehicle to gain broad market passive exposure to the domestic listed property sector.
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.
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 scores Silver 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.
Sector outlook
Rising interest rates hurt real estate prices. REIT equity analyst, Winky Tan notes the recent U-turn on rate hikes by the RBA and the conflict in the Middle East exacerbates the inflation outlook, with more than half the market now expecting a follow-up rate rise in May.
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.
