VGSvsVGAD
Same index, different currency approach. When does hedging help?
Vanguard MSCI Index International Shares ETF · Vanguard MSCI Intl Shares (Hedged) ETF
VGAD hedges AUD/USD currency risk for an extra 3bp p.a. - useful when the AUD rises, but a drag when it falls. Unhedged (VGS) has typically won over long periods as the AUD trended lower, though hedging outcomes vary widely year-to-year.
Score Breakdown
Fund Profiles
Vanguard's VGS is one of Australia's most popular international ETFs, tracking the MSCI World ex-Australia Index across 23 developed markets with approximately 1,500 holdings. The fund is unhedged, meaning returns include the effect of currency movements, and carries a heavy US weighting of roughly 70 per cent, reflecting America's dominance in global equity markets. Investors seeking a simple, low-cost core international equity holding to pair with an Australian ETF like VAS - building a two-fund global portfolio - will find VGS an ideal foundation for long-term wealth building.
Vanguard's VGAD tracks the same MSCI World ex-Australia Index as the popular VGS but adds a currency hedge back to the Australian dollar, removing the impact of AUD/foreign currency fluctuations on returns. This hedging process introduces a slightly higher cost compared to VGS, and the fund suits investors who want pure international equity returns isolated from currency movements. Those with a bullish view on the Australian dollar - or investors seeking to pair VGAD with unhedged VGS to manage overall portfolio currency exposure - will find this ETF a useful strategic tool.