The Diversified All Growth ETF (DHHF) has recently surpassed the $1 billion mark, offering exposure to a globally diversified portfolio of equities across large, mid, and small-cap stocks in Australia, developed markets, and emerging economies.
Delivering over 17.5 per cent returns in the past year, the exchange-traded fund (ETF) provider said the fund has continued to attract steady inflows as investors increasingly use diversified ETFs as whole-of-portfolio solutions or core building blocks in their strategies.
Speaking to InvestorDaily, Betashares senior investment strategist Cameron Gleeson said that the simplicity of gaining exposure to over 1,000 companies and 8,000 global securities makes the fund an attractive and straightforward option, particularly for retail investors.
“That ability to get that diversified exposure in one trade is really powerful and it means you can concentrate on not overthinking investing and your approach to saving,” Gleeson said.
Moreover, with a fee of 19 basis points, he said that as the lowest-cost diversified ETF on the ASX, this also adds to its appeal.
While many diversified ETFs are available in Australia, this fund stood out at its launch five years ago for its “all growth” approach. This means that unlike typical diversified funds, it does not allocate to defensive assets like cash, gold, or fixed income.
Gleeson explained that this approach caters to investors who either prefer no allocation to defensive assets, or have a risk profile more suited to equity and growth-focused investments.
In particular, he noted that young investors can be a common use case for this type of ETF, as those with a long-term investment horizon can sometimes afford to take on more risk to grow their wealth, despite short-term volatility.
Another example he identified was advisers seeking a low-cost allocation to a diversified portfolio of Australian and global shares.
“Most active managers underperform, so most of the time you’re probably better off just holding the market,” Gleeson said.
Using DHHF as a core allocation, he argued that advisers can still allow clients to customise their defensive assets, offering a way to achieve both objectives.
Looking at the ETF’s performance over time as a pure risk asset, Gleeson noted that it particularly stood out during periods when bond portfolios struggled and failed to provide defensiveness, such as in 2022 when cash rates rose in Australia and the US.
“Indeed, you would've been better off from a performance perspective within that year not holding bonds. As a result, DHHF performed very strongly relative to other diversified ETFs that did hold our bonds within their portfolio,” he said.
Looking ahead, he argued that despite understandable nerves around markets hitting all-time highs - and fixed income regaining favour - both global and Australian equities still have positive signs of earnings growth.
For many investors, he argued, opting for something like DHHF removes much of the guesswork and fear of investing during volatile periods.
Drawbacks
On the other hand, Global X senior product and investment strategist Marc Jocum argued that the all-growth model has some drawbacks for investors considering diversified ETFs, noting that it isn’t always as straightforward or clear-cut as it might seem.
“When comparing diversified ETFs, investors should look beyond fees and consider the underlying asset mix, sector and market exposures, and how the portfolio is constructed - whether through direct holdings, managed funds, or underlying ETFs,” Jocum told InvestorDaily.
From his perspective, he said it’s also important to consider the domicile of the ETF, since Australian and offshore-listed vehicles can have very different tax implications for investors. He was particularly sceptical that such a limited allocation to defensive assets would suit all investors.
“These ETFs may suit high-risk-tolerance investors but can underperform during market downturns. This highlights the ongoing relevance of defensive allocations, such as bonds or gold, which remain a critical part of many portfolios,” he said.
Beyond the all-growth model, he noted that some other diversified ETFs - and even super funds - that hold defensive assets still exclude gold.
“[This means] investors may be underexposed to an asset class that has been one of the best-performing assets over the past decade and has a history of protecting against share market volatility and currency debasement,” Jocum said.
At the same time, he said that looking ahead, he expects ongoing innovation in diversified ETFs as providers work to deliver time- and cost-efficient solutions that offer comprehensive, easy-to-access broad market exposure. He argued that the winning issuers will be those that help investors meet their goals efficiently while prioritising diversification and accessibility.
Moreover, he concluded that diversified ETFs aren’t limited to traditional assets, pointing to Global X products like the Bloomberg Commodity Complex ETF (BCOM), and the Physical Precious Metal Basket (ETPMPM), which offer broad commodity and precious metal exposure.
