DHHF and other VDHG alternatives


BetaShares released a range of diversified funds in December 2019, which were underwhelming, to say the least. They’re now modifying them, and these products are quite an improvement.
We’ll also take a look at BlackRock’s new High Growth Multi-Index Fund.


  • 100% equities (using only total market index funds)
  • 37% Australian equities (A200) and 63% global equities
  • The global equities will be weighted according to the all-world-all-cap benchmark. In other words, they don’t have a static allocation to each underlying ETF – their weights will vary as the market does. This includes large, mid, and small global companies as well as emerging markets using the following US-domiciled funds:

VTI US total stock market
SPDW Developed World Ex-US
SPEM Emerging markets

Finally an all-in-one with no bonds!

10% bonds aren’t a deal-breaker, but it’s just one more of a range of minor issues with VDHG, which all add up. A diversified fund with 100% growth assets fills a need in the market, which Vanguard didn’t bother filling (even though they eventually did in their Canadian all-in-one range). Well done, BetaShares, for bringing something to the market that was missing.

37% Australian shares and no AREITs (Australian REITs)

A big improvement in diversification from BetaShares previous version of the fund, bringing the global equities up to 63% from their previous 50% (of the equities). At 37% Australian equities, it’s a bit sneaky being marginally lower than Vanguard’s 40% (of their equities), but they’re probably doing what I suspect Vanguard is also doing, which is to avoid alienating market share of individuals stuck with the outdated idea of home bias. It’s a shame that they didn’t switch out 12 of that 37% into Ex20 to reduce the high concentration of the largest 20 companies at the top of the Australian index.

No AUD-hedged global equities

This seems logical. AUD-hedged global equities make sense as a replacement when lowering the proportion of Australian equities. It reduces the concentration risk of the Australian market while maintaining the AUD allocation across the whole portfolio. But Vanguard’s funds already have 40% of equities in Australian equities, and having another 18% in AUD-hedged global equities, combined with an investor’s other AUD assets (cash, bonds, house, income), seems like they may be lacking the international currency diversification that a more substantial allocation of unhedged global equities would bring.


There is tax drag in US-domiciled funds that hold non-US assets (in this case, SPDW & SPEM). Reddit user HockeyMonkey went through the PDS’s and found the tax drag to be about 9 basis points bringing the cost of MER + tax drag to 0.28%, which is basically the same as VDHG (1 basis point is immaterial).

A short summary of tax drag:

When an Australian fund 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.
Here is a list of countries that Australia has a double taxation agreement (DTA) with – there are a lot of them.
Income Tax Treaties | Treasury.gov.au
Claiming tax credits means you get money back in your pocket for tax paid on your behalf, and an inability to claim that tax back results in a loss referred to as tax drag.

Besides tax drag, there’s a tax-efficient upside to DHHF over Vanguard’s funds, which is that DHHF holds ETFs within them, unlike Vanguard, which holds the non-ETF version of their funds within them.

A short summary of the tax efficiency of ETFs over managed funds

The entire fund is one pool of assets in managed funds, so other investors selling their units triggers capital gains for all the fund’s investors. So even if you don’t sell any units, you still have to realise capital gains. This doesn’t occur with ETFs due to their tax structure, and instead, you defer these capital gains until you sell your ETF shares.
Unlike tax-drag, where money is lost due to an inability to claim the tax paid, in this case, you’re paying tax sooner.
Unfortunately, it’s impossible to quantify the cost of this because it’s dependent on how long the asset is held, but as noted here and here, it’s enough for some to avoid Vanguard’s all-in-one funds entirely and use the individual ETFs.

While there are some differences between DHHF and VDHG, they are roughly in-line with each other, with the main differentiating point being the bond allocation. If you don’t want or need bonds, DHHF seems the obvious choice.

The combination of a lower expense ratio and being the only all-in-one without bonds will make people flock to DHHF, giving Vanguard a run for their money. Competition is fantastic for consumers.

BlackRock High Growth Multi-Index Fund

Talking about competition, BlackRock Australia also released a multi-asset all-in-one high growth fund earlier this year. Although it is not offered as an ETF, only as a managed fund, and requires a minimum of $50,000 (are they allergic to money?).

Asset class Weight
Australian Equities 30%
International Equities – Developed Markets (unhedged) 23%
International Equities – Developed Markets (hedged) 8%
International Equities – Emerging Markets 9%
International Listed Property 6%
Gold 7%
Australian Fixed Interest 3%
Australian inflation-linked bonds 3%
US inflation-linked bonds 3%
Global high yield corporate fixed interest 6%
Cash 2%
Foreign Currency Exposure 45%

There’s a lot to like about this fund. It’s a true multi-asset fund with Australian equities, international equities, property, gold, and bonds.

The website says it is consistent with an 85/15 high growth allocation. It’s hard to define the growth vs defensive allocation with high yield bonds and gold, but this is a good estimate.

The REITs are international REITs, which is far better diversified than both Vanguard’s and BetaShares’ earlier diversified funds, which used AREITs (Australian REITs). My main gripe with AREITs is the concentration risk of having so much Australian stocks in the all-in-one fund. The REITs being international improves diversification, as does adding gold and bonds.

The overall foreign currency exposure is 45%, which is in between that of VDHG and DHHF. In my opinion, VDHG is on the high side, so I like this.

There are a couple of downsides worth noting.

Firstly, REITs are highly tax-inefficient. Consequently, if you hold it outside a low or zero tax rate environment like super, you’re going to be losing more to taxes than what is already in broad market index funds. However, there’s the argument for not letting the tail wag the dog, meaning not to make decisions based entirely on tax consequences, so there isn’t a strong case for or against adding REITs, but if REITs are included, it should be global, and that is what’s in this fund. Although, if you decide to hold additional REITs beyond what is already in the index, it would be better held in super.

Another downside is that high yield bonds are just as tax inefficient as REITs and similarly are better off held in super. Besides that, the diversification benefit is arguable. In poor economic periods, high yield bonds tend to fall, losing much of the diversification benefits. This is opposed to government bonds which have historically had a negative correlation with equities during economic turmoil.

A further downside is that the underlying funds appear to be managed funds instead of ETFs, which the Vanguard all-in-ones suffer from, which will cause some tax inefficiency just as with the Vanguard all-in-one funds.

The MER of the fund is 0.30 (including transaction fees of 0.11%).

BetaShares converting 3 of their diversified funds to ESG

While I’m not personally interested in ESG (also known as ‘sustainable’ or ‘ethical’ investing) and won’t be going into much detail here, their three new ESG diversified funds serve the purpose of being distinct from other all-in-one diversified funds in the market. It’s good to see BetaShares being innovative and offering something new to the market.

The management cost of these funds is 0.39%

Here is a breakdown of the 3 funds.

Fund Asset allocation
stocks to bonds
DZZF (Ethical Diversified High Growth ETF) 90 / 10
DGGF (Ethical Diversified Growth ETF) 70 / 30
DBBF (Ethical Diversified Balanced ETF) 50 / 50

In all the funds, the equity portion is split the same.

40% FAIR   –   BetaShares Australian Sustainability Leaders ETF
60% ETHI   –   BetaShares Global Sustainability Leaders ETF

The bonds are also ESG.

GBND   –   BetaShares Sustainability Leaders Diversified Bond ETF – Currency Hedged

I haven’t delved deeply into these products, but some things that stand out:

  1. The management expense ratio of the diversified funds are lower than the price of the underlying funds.
  2. ETHI is 72% concentrated in the US market, whereas globally, the US makes up 57.5% at the time of writing. The result is less diversification into the rest of the world.
  3. ETHI misses emerging markets
  4. ETHI misses developed small cap stocks

Just as VDHG has its own downsides but is still a good solution for many, these may be a good solution for those looking for an easy and simple way to invest through an all-in-on ESG solution.

Final thoughts

For those looking for a 100% growth option, DHHF fits the bill nicely. The cost doesn’t differ materially from VDHG after accounting for tax drag, but there are no bonds, which will be more suitable for some investors.

For those looking at a multi asset class high growth diversified fund, BlackRock’s new fund looks pretty good — with some bonds, global REITs, and the remaining in globally diversified stocks with a good currency spread. The lack of an ETF option and the need for a $50,000 minimum are perplexing, but all in all, a great fund at a great price.

For those looking for an ESG all-in-one, they now have options.

These funds are big wins for consumers in offering new and varying products and price competition.