DHHF has taken the Australian FIRE community by storm as it has pioneered the first pure equity diversified ETF. The fund has been released at a very low fee of 0.19%, undercutting the famous VDHG. Should I Buy DHHF ETF in 2022?
DHHF ASX: Pros and Cons
- Massive Diversification
- Exposure to International Assets
- Exposure to Emerging Markets
- Reasonably Priced
- Australian Domiciled
- DRIP Opportunities
- Large Australian Allocations
- No Defensive Assets* (Can be seen as a positive)
- Unknown Historic Returns
- Cheaper to create your own fund
Who Should Buy DHHF ETF
The BetaShares Diversified All Growth ETF (DHHF) has been adopted by many investors as an alternative to the VDHG ETF. These funds offer broad international diversification across equities. DHHF can be used by many investors to gain exposure to a broad basket of some of the world’s biggest public companies in an efficient manner.
The passive nature of the fund makes it a good option for FIRE investors.
DHHF is seen as an excellent alternative to VDHG for investors looking for a cheaper option or an equity-only portfolio compared to VDHG’s fixed income allocation.
It can be suitable for beginners and advanced investors to add instant diversification to a portfolio. The fund may be used by itself or in conjunction with other funds, as an alternative to VDHG depending on your portfolio goals. Here are some popular ideas of how it can be used in a portfolio: Creating The Ultimate ETF Portfolio
Should I Buy DHHF ETF: Facts
|Fund Name||BetaShares Diversified All Growth ETF|
|Benchmark||DHHF’s Growth Target Allocation|
|Number of Holdings||4 ETFs, USD and AUD (est. 11,873 stocks)|
|Assets Under Management||$110 million|
|Inception Date||15 December 2020|
|Distribution Reinvestment Plan||Yes|
|Total Returns Since Inception||16.55%|
Should I Buy DHHF ETF: Price
About DHHF ASX
The BetaShares Diversified All Growth ETF (DHHF) is quickly becoming an excellent alternative to VDHG as a new lower-cost fan favorite amongst the FIRE community over at r/ASX. The ETF has $110 Million in funds under management and is rapidly growing as a success for BetaShares. DHHF provides massive diversification across international shares in one reasonably priced product. It also offers potential long-term capital growth along with dividend income and franking credits. The fund achieves this while cutting the fixed-income component we see is VDHG, which we see as a positive for many.
The ETF is a passive index fund comprising a High Growth allocation of funds created by BetaShares. The Fund invests in a diversified portfolio of securities, which means the Fund is less exposed to the performance fluctuations of individual securities and the Australian stock market. The fund takes a passive index investing approach. which has been shown to outperform Active investing.
S&P concludes that 81.70% of active funds will underperform the index over a five-year period. However, this is in relation to broad market indexes. The exact stats are unclear for funds not based on a broad market index.
DHHF is quickly becoming an excellent alternative to the very popular VDHG ETF by Vanguard
DHHF Share Registry: Link Market Services. Through Link Market Services, you can manage your holdings and communications, and also select whether or not to reinvest distributions.
DHHF is domiciled in Australia meaning it is a registered fund in Australia for tax purposes. Investors who buy into this ETF, and are Australian residents for tax purposes, will be subject to Australian taxes and regulation.
DHHF ETF Portfolio Goal
“DHHF aims to provide low-cost exposure to a diversified portfolio with high growth potential, that may suit investors with a very high tolerance for risk.” Source, BetaShares
The DHHF Benchmark Index
DHHF is created based around BetaShares Growth Target Allocation, which seeks to maintain 100% exposure to growth assets. The exact definition of DHHF’s Strategic Asset Allocation is seen in the below table.
|Asset Class||Strategic Asset Allocation||Underlying ETFs|
|Australian Equities||37%||BetaShares Australia 200 ETF (A200), which is benchmarked to the Solactive Australia 200 Index|
|International Equities||63%||Vanguard Total Stock Market ETF (VTI) which is benchmarked to the CRSP US Total Market Index|
|SPDR Portfolio Developed World ex-US ETF (SPDW) which is benchmarked to the S&P Developed Ex-US BMI Index|
|SPDR Portfolio Emerging Markets ETF (SPEM) which is benchmarked to the S&P Emerging BMI Index|
|Total Growth Assets||100%|
Within the international Equities allocation, the fund seeks to provide exposure to US equities, non-US developed market equities, and emerging markets. The holdings within this category are passively weighted by the fund each quarter to represent the market capitalization of the respective indices in which they aim to track.
The fund is rebalanced each quarter when the strategic asset allocation deviated more than 2% from the target. With such a low threshold operating range from the fund, rebalancing is likely to be quite high. In comparison Vanguard’s VDHG has quite a broad operating range closer to 4%, meaning turnover would theoretically be lower.
Should I Buy DHHF ETF: Holdings
We can see from the fund’s strategic asset allocation DHHF is diversified across global equities. Below we have broken down the four ETFs held by DHHF.
|Funds||Allocation (Nov 2021)|
|BetaShares Australia 200 ETF (A200)||37%|
|The Vanguard Total Stock Market ETF (VTI)||35.10%|
|The SPDR Portfolio Developed World ex-US ETF (SPDW)||20.30%|
|The SPDR Portfolio Emerging Markets ETF (SPEM)||7.60%|
We can see that DHHF allows investors broad exposure to global equities. Although one limitation we see is the large home bias within the fund. Over 38% of the fund's capital is invested in Australian companies. Of the top 20 holdings, 14 are Australian businesses. In reality, Australia is the 12th largest economy in the world, representing only 1.7% of the total world nominal GDP. Source, Austrade
Top 20 DHHF ETF Holdings
BetaShares Australia 200 ETF: A200 37%
The BetaShares Australia 200 ETF is a popular ETF launched in May 2018 that was created to compete against popular ETFs VAS, IOZ, and STW at a very low fee of 0.07%. The fund tracks the Solactive Australia 200 Index.
37% introduces a lot of home bias into the fund as the Australian market only accounts for roughly 2% of the world’s global economy. However, Australian stocks often provide excellent dividends with high yields and lucrative imputation credits, which can make A200 appealing.
- Fund Objective: A200 aims to track the performance of an index comprising 200 of the largest companies by market capitalisation listed on the ASX.
- MER: 0.07%
- Fund Inception: 7 May 2018
- Holdings: 200
Top Five A200 Holdings
|Holding||% Of Fund||% Of DHHF|
Due to the nature of the Australian economy, A200 is largely weighted towards financials and materials, which together make up 48.8% of the ETF.
Vanguard Total Stock Market ETF: VTI 35.1%
Vanguard total stock market ETF (VTI) seeks to replicate the performance of the broad US stock market including Large, mid, and small-cap companies. The fund at 4025 holdings replicates a large proportion of the US market and has over $1.3 trillion in AUM.
VTI has excellent historic returns far exceeding the other funds within DHHF. VTI is also comprised of many of the most recognized and largest brands in the world including Facebook, Apple, and Amazon. The US accounts for almost one-quarter of the world’s global economy. Due to this, it makes sense to include a large allocation to the US through VTI.
- Fund Objective: Seeks to track the performance of the CRSP US Total Market Index
- MER: 0.03%
- Fund Inception: 24 May 2001
- Holdings: 4025
Top Five VTI Holdings
|Holding||% Of Fund||% Of DHHF|
VTI tracks the US stock market which has an excellent allocation to technology stocks of 27.7%, which can make it a great addition to Australian holdings where technology is underrepresented.
SPDR Portfolio Developed World ex-US ETF: SPDW 20.3%
SPDR Portfolio Developed World ex-US ETF is a low-cost ETF, designed to provide broad, diversified exposure to core asset classes internationally excluding the US. The fund has a total of $12.3 Trillion in AUM.
provides further diversification to the rest of the developed world. Although we do see slight Australian overlap this fund does complement the other funds extremely well. Through SPDW investors also gain diversity in many sectors including Industrials, Financials, and Healthcare. This can complement the US high allocation to tech and Australia's dependence on banks and miners.
- Fund Objective: Seeks to provide investment results that, correspond generally to the total return performance of the S&P Developed Ex-U.S. BMI Index.
- MER: 0.04%
- Fund Inception: 20 April 2007
- Holdings: 2419
Top Five SPDW Holdings
|Holding||% Of Fund||% Of DHHF|
|Roche Holding Ltd||1.11||0.225|
|Toyota Motor Corp.||0.82||0.166|
We can see the fund's top allocations include the Japanese, UK, Canadian and French markets. While Financial, Industries, and Consumer discretionary are their largest sector holdings.
SPDR Portfolio Emerging Markets ETF: SPEM 7.6%
The SPEM ETF helps investors gain diversified exposure across emerging markets. The largest allocation is to Chinese markets which account for 35.92% of the fund followed by Taiwan 16.46%, and India 15.46%.
SPEM invests in many emerging markets such as China which can leave the fund susceptible to the political environment, and currency fluctuations. Although this fund can be seen as risky it also provides exposure to some of the fastest-growing economies and businesses.
- Fund Objective: The SPDR Portfolio Emerging Markets ETF seeks to provide investment results that, correspond generally to the total return performance of the S&P Emerging BMI Index.
- MER: 0.11%
- Fund Inception: 20 March 2007
- Holdings: 5229
Top Five SPEM Holdings
|Holding||% Of Fund||% Of DHHF|
|Taiwan Semiconductor Manufacturing||4.6||0.349|
|Alibaba Group Holding||3.56||0.270|
|Meituan Class B||1.63||0.123|
|Reliance Industries Limited Sponsored||1.35||0.102|
Should I Buy DHHF ETF: Characteristics
Based on DHHF's late 2021 allocation (as per the holdings section above) the fund's current PE ratio is 19.53x, and the price to book is 1.4x. The funds trailing twelve-month distribution yield has been 1.54% net.
Should I Buy DHHF ETF: Fees
- Management Fee: 0.19% p.a
- Indirect Costs: 0%
- Bid/Ask Spread: 0.21% in January 2021, Unknow Long-term
How Are DHHF ETF Management Fees Paid?
Management fees are automatically deducted from the fund’s Net Asset Value on a daily basis. This means is you as an investor never have to directly send money to BetaShares. It is all processed by the fund as they deduct the fees from the underlying earnings/capital of the fund.
Because of this you never really notice the fees, instead, it just reduces the fund’s performance over time. When the fund sends out its annual statement at tax time you can see the full details of this.
DHHF ETF Bid-Ask Spread
The bid-ask spread is the difference in price between the highest price that a buyer is willing to pay for a security and the lowest price for which a seller is willing to sell it.
- The narrower the spread the better, as this reduces the trading costs associated with buying and selling ETFs
- Exchange-based spreads, as on the ASX, are set by the competitive tensions between market markers
- Larger Funds will tend to have lower bid-ask spreads.
- Bid-Ask spreads are not set but constantly change throughout the day, depending on supply and demand.
In January the average spread was 0.21%. However, there is no information regarding the long-term average of the fund. Since DHHF is a relatively new fund, the average bid-ask spread of the fund is unclear. When purchasing units in the fund you can refer to the live iNAV of the fund to ensure spreads are reasonable.
Investors can assess the fair value of an ETF by comparing the ETF’s market price with the ETF’s net asset value (NAV) per unit. The iNAV provides an indication of the fair value of the ETF in real-time. This can be found on the fund's website during trading hours.
Should I Buy DHHF ETF: Fee Comparison
|Average Bid/Ask Spread||0.02%||?||0.02%||0.04|
We can see that DHHF has a much cheaper management fee than VDHG. At 0.19% this represents $19 per annum for a $10,000 investment, whilst VDHG would represent $27 per year.
There is an 8 basis-point difference between VDHG and DHHF or 0.08% pa.
DHHF ETF Tax Drag and Total Fee Impact to Investors
Since DHHF contains some US-domiciled funds which contain non-US assets; i.e. SPDW and SPEM, these funds will incur a tax drag for the overall performance of DHHF.
When an Australian fund (DHHF) holds a US fund that holds stocks from companies in non-US countries, you cannot claim the dividend withholding tax credits paid by the fund that you could claim if the Australian fund held them directly.
As a result of this impact, we do see a slight reduction in net returns. Although this is very small and nothing to be concerned about, it does effectively increase the 'fee' of the fund. It varies depending on the dividend yield of SPEM and SPDW as well as the allocation of these funds. Based on the previous twelve months the tax drag was 0.09%, increasing the theoretical cost of the fund to 0.28%
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Should I Buy DHHF ETF: Performance
In the below chart we set out the returns of the holdings of DHHF. In order to recreate historic returns, we have used VAS (ASX 300) in place of A200. Using these funds we have also created a rough guide that would demonstrate the past performance of holdings similar to DHHF.
The holdings used in the theoretical calculations are:
- 37% VAS
- 35% VTI
- 21% SPDW
- 7% SPEM
From this graph, we can see that historically VTI has been a large driving factor for the fund, with excellent historic returns. Both VTI and the ASX have outperformed SPDW and SPEM over these timeframes.
Should I Buy DHHF ETF: Competitors
The main competition for DHHF in the High Grow Diversified index space is the popular Vanguard fund VDHG. Read our VDHG report here.
VDHG has a fixed income allocation of 10%, which is comprised of bonds. DHHF strictly holds equities.
From our comparison, we can see that VDHG is a much larger fund in terms of assets under management compared to the newly launched DHHF. VDHG has a very low turnover ratio due to its large portfolio allowable range. Although in saying this all these funds have a very low turnover.
DHHF VS VDHG
One of the major differences between DHHF and VDHG is the fixed income assets or defensive assets held by VDHG, which are comprised of bonds. In the below graph I have summarised the holdings of VDHG
|Growth Allocation (Equities)||100%||90%|
|Defensive Allocation (Bonds)||0%||10%|
|Hedging to AUD||No||Yes (16% Equities, 7% Bonds)|
|Australian Equities Allocation||37%||36%|
|International Equities Allocation||63%||54%|
|Emerging Markets Allocation||7.60%||5%|
|Small-Cap Market Allocation||8.31%||6.50%|
|MER||0.19% p.a.||0.27% p.a.|
DHHF VS VDHG Defensive Assets
Defensive assets such as bonds may be used by an investor to help smooth returns, especially during periods of high market volatility.
Bonds can offer a good source of income and some are considered risk-free. But for most investors, we also need to consider how bonds have performed in the past compared to shares. Historically shares have far out-performed the returns of bonds. The total returns for bonds have averaged 5.63% per year compared to shares 9.1%. For more information on bonds read this article.
When compared against VDAG (world ex-Australia hedged) and VAS (ASX 200) we can see that VDHG's small allocation to fixed income may be responsible for smoothing out returns over the COVID crash.
- VGAD experienced a drop of 37.09%
- VAS experienced a drop of 38.3%
- VDHG experienced a drop of 30%
However, we can see the bull market after the crash has driven substantial gains where we can see that VDHG has fallen flat compared to broad market index funds.
Over a one year period:
- VGAD is up 19.78%
- VAS is up 25.53%
- VDHG is up 15.05%
We can also see from the graph below that long-term investors holding before and after the crash would be better off in VGAD or VAS.
Bonds and fixed income are can be added to a portfolio to reduce risk and smooth returns. However, over the long run equities have been shown to far outperform bond returns. The COVID period has demonstrated this well, we see the smoothing effect during the downturn and the vast outperformance during the bull market.
However, we can see that investors have performed much better by adopting a buy-and-hold mentality. Investors that didn't sell during the downturn were much better off investing in equities.
In the current market condition, we are seeing low-interest rates, with growing inflation. With the reduction in returns from cash and bonds, investors have turned heavily to equities.
For these reasons I personally prefer solely growth assets.
DHHF VS VDHG To Hedge or Not to Hedge?
Hedging refers to if the fund has reduced the impact of foreign currency fluctuations using hedging techniques. Consider how a currency changes when you order something from another country, in investing this can alter your returns, for better or for worse.
Many funds will have a hedged and unhedged version of the same fund, generally speaking, the hedged version will have slightly higher fees to account for the costs involved in hedging a currency.
Short-term vs Long-term: Whether to hedge is for each investor to consider. Generally speaking, those investing for a shorter time frame or those with a lower risk tolerance may choose a hedged option to remove the currency uncertainty. For those investing over a longer-term and for buy and hold investors an unhedged option may be a better choice. As it will attract lower fees (generally speaking), it can also add for an additional level of diversification, and currency fluctuations tend to average out over the long term.
Choosing an unhedged option can provide additional exposure to international economies and currencies.
Unhedged Funds can add diversity: Expanding on the additional level of diversification point, by choosing an unhedged option not only are we betting on this foreign company but also gaining exposure to their currency and the overall economy. If the AUD goes down relative to this foreign currency our investment will be worth more in AUD, and consequently, if the AUD rises against the foreign currency our investment will be worth less in AUD.
Hence consider a situation where the Australian economy experiences a recession, not only will our international investments perform strongly relative to our domestic holdings but also a fall in the AUD will cause a further boost to our returns.
VDHG's Large Distributions: VDHG has always paid a large distribution, this is linked to its holdings in the International Shares Index (Hedged). Hedging currencies required a lot of buying and selling with the income then passed onto shareholders. The fixed income component also realizes a large amount of income.
The high distribution can actually be seen as a downside to the fund as this creates a large tax liability for investors which can reduce the overall net performance of the fund.
High distribution can actually be seen as a negative; they create large tax liabilities, which can reduce net returns
Non-hedged Funds which pay out very low distributions can be very attractive for net returns, due to their lower tax liabilities.
For more information on Hedging, Here’s a link to Vanguard’s To Hedge or Not to Hedge Research.
DHHF VS Rolling Your Own Portfolio?
After learning that DHHF is comprised of four popular ETFs the question may have come to your mind, can't I just buy these ETFs myself? Yes, this is an option, but which is better?
One bonus to buying DHHF directly is simplicity. In one product you gain access to a broad range of international equities. Since the fund will automatically rebalance the funds in a passive methodology there is no need to manually rebalance. This will also ensure that your portfolio remains as passive as possible. Since DHHF is domiciled in Australia there is no need to complete a W-8BEN form. With only having to purchase one ETF there is also the consideration of reduced brokerage.
The main advantage of creating your own fund is the flexibility to actively weigh the ETFs based on your personal preference. Although for some this may be seen as a negative as it introduced an active strategy into your portfolio.
How do the Fees Compare? It is cheaper to create your own fund. Since the underlying weightings of DHHF are constantly changing based on the current allocation the effective fee to create your own fund would be 0.0925% compared to DHHFs 0.19%. This would also remove tax drag from your returns.
Creating Your Own: 0.0925% DHHF: 0.19%
Should I Buy DHHF ETF: Distributions
At the current rates, DHHF pays a distribution of $0.4523 averaged over the last twelve months or a grossed-up $0.4993, after accounting for franking credits. This represents a yield of 1.54% (1.69% gross). As an ETF is a trust structure the fund will payout all its earnings after expenses to investors.
- 12-Month Dividend Yield: 1.54%
DHHF ETF Distribution History
When does DHHF ETF pay dividends? Historically DHHF pays distributions quarterly (4 times a year). The Ex-Date of the distributions is usually the first day of trading in January, April, July, and October (Every three months).
The distributions are normally be paid within 20 business days following the end of the distribution period. DHHF investors are eligible to participate in a Distribution Reinvestment Plan (DRIP), which is automatically selected as the default for investors, but can be altered through the share registry, Link Market Services.
Should I Buy DHHF ETF: Prophet's Take
DHHF has been a pioneer in the diversified ETF space, being Australia’s first pure equities diversified ETF at a very low-cost price. The fund allows exposure to international equities across all capitalizations, including over 10,000 companies.
Due to the holdings allocation of the fund, there is a large portion of Australian shares. These are held out of proportion, for example, Commonwealth Bank has a higher allocation than Apple and Amazon.
VDHG is the largest competitor and a very popular fund within the FIRE community. This fund has a 10% allocation to defensive assets, which may be seen a positive or negative depending on investor preference.
DHHF is an excellent way to gain diversification. I am bullish on the fund and it can act as an excellent addition to many investors' portfolios or as a standalone investment. However, I prefer the option of creating my own portfolio with diversification which allows for cheaper effective fees.
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