VGS and VGAD are both Vanguard ETFs tracking the MSCI World ex-Australia Index — they hold identical underlying stocks. The only difference is currency treatment: VGS is unhedged, meaning AUD/USD movements affect returns; VGAD hedges back to Australian dollars at a small ongoing cost. MERs are 0.18% and 0.21% respectively. General information only — not financial advice.
See live overlap and the fee difference in our VGAD vs VGS comparison tool.
Key findings (as at Q2 2026)
- VGS and VGAD track the same MSCI World ex-Australia index and hold the same companies. The only structural difference is currency hedging.
- VGS charges 0.18% p.a. and VGAD charges 0.21% p.a.. VGAD's higher fee reflects the cost of running the hedging overlay.
- VGS leaves AUD/USD currency exposure unhedged; VGAD hedges that exposure back to AUD on a rolling basis.
- General information only, not financial advice.
VGS and VGAD are often discussed as if they were competing funds, but mechanically they are the same investment with one feature turned on or off. Both are Vanguard ETFs that track the MSCI World ex-Australia Index, the same approximately 1,275 large and mid-cap developed-market companies. The choice between them is not about which companies to own — it is about whether to carry AUD/USD currency risk on top of that exposure. This guide explains what hedging changes, what it costs and who each version may suit. General information only, not financial advice.
At a glance
| VGS | VGAD | |
|---|---|---|
| Full name | Vanguard MSCI Index International Shares ETF | Vanguard MSCI Index International Shares (Hedged) ETF |
| Index tracked | MSCI World ex-Australia | MSCI World ex-Australia (AUD Hedged) |
| Currency exposure | Unhedged | Hedged to AUD |
| Holdings | ~1,275 | ~1,275 |
| MER | 0.18% p.a. | 0.21% p.a. |
| Fund size (Q2 2026) | $15.5B | $5.1B |
| Trailing yield | approximately 1.6% | approximately 1.5% |
| Distributions | Quarterly | Semi-annually |
| Franking credits | No | No |
What does currency hedging actually do?
When an Australian investor buys VGS, two things move the AUD value of the holding: changes in the underlying share prices, and changes in the AUD/USD (and AUD/EUR, AUD/JPY etc.) exchange rate. If US shares rise 10% but the AUD strengthens 10% against the USD, the AUD value of a VGS holding can be roughly flat. The currency exposure cuts both ways: a falling AUD boosts unhedged returns, and a rising AUD reduces them.
VGAD removes that second moving part. Vanguard uses currency forward contracts to neutralise the AUD/USD, AUD/EUR and other developed-market currency exposures back to AUD on a rolling basis. The investor's return then tracks the underlying shares in their local-currency terms, with the AUD/foreign-currency layer stripped out. This is the only mechanical difference between the two ETFs.
When does hedging help vs hurt?
Hedging is helpful when the AUD strengthens against the currencies of the underlying markets, because the foreign-currency loss that VGS would suffer does not flow through to VGAD. Hedging hurts (relative to unhedged) when the AUD weakens, because VGS captures the foreign-currency gain and VGAD does not. Over a single year the gap can be significant in either direction. Over very long periods, the two have historically converged within a range of a few percentage points per year. Past performance is not a reliable indicator of future returns.
Distribution yield: same companies, different mechanics
VGS's trailing distribution yield is approximately 1.6% and VGAD's is approximately 1.5% (as at Q2 2026). Because both funds hold the same companies, the underlying dividend stream is the same. The reason yields can diverge between hedged and unhedged variants is that the cost of running the currency hedge — and any gains or losses on the forward contracts themselves — flows through distributions rather than being absorbed into NAV in the same way as price returns. The result is that the hedged version's reported yield can sit above or below the unhedged version's yield in any given year, even though both funds receive the same underlying dividends. Distributions are not guaranteed and vary each period.
Performance comparison
VGS has returned 15.1% over the past year, 16.1% p.a. over three years and 12.8% p.a. over five years. VGAD has returned 28.5% over the past year, 19.6% p.a. over three years and 11.0% p.a. over five years. Past performance is not a reliable indicator of future returns. The difference between the two reflects the AUD/USD path over each period — not a difference in stock selection.
The fee gap in real dollars
VGS costs $18/yr per $10,000 and VGAD costs $21/yr per $10,000. The gap reflects the operational cost of running the hedging overlay. On a $100,000 holding the annual difference is several times the $10,000 figure. The ETFLens Fee Calculator compounds that gap over 10, 20 and 30 years.
Tax treatment
Neither fund carries Australian franking credits because both hold non-Australian companies. Distributions from international holdings can include foreign income tax offsets (FITOs) for foreign withholding tax paid on foreign dividends, which Australian residents may be able to claim. Tax outcomes vary by individual circumstances. Speak with a registered tax adviser. General information only.
Who may suit VGS
VGS may suit you if you want long-term exposure to global developed-market shares and accept that AUD/USD movements will add to or subtract from returns along the way. Some investors take the view that a weakening AUD partly offsets domestic inflation pressures, and that the diversifying effect of foreign currency exposure is itself useful.
Who may suit VGAD
VGAD may suit you if your objective is to track the underlying global share returns specifically, without the currency layer — for example, investors who plan to draw on the portfolio in AUD in the relatively near term, or who want their developed-market exposure to behave more like a domestic share fund in AUD terms. The trade-off is the higher MER and the loss of the foreign-currency diversification effect.
Holding both
Some investors hold both VGS and VGAD as a way of partially hedging the global allocation rather than fully hedging or fully leaving it exposed. This is a deliberate currency-risk decision, not a diversification gain — the underlying companies are the same. The ETFLens overlap checker confirms that the holdings are effectively identical (overlap is approximately 86%). General information only, not financial advice.
See the full side-by-side breakdown: holdings overlap, sector exposure and fee difference in dollars.
Compare VGAD vs VGS on ETFLens →General information only. Not financial advice. This article does not consider your personal financial situation, objectives or needs. Past performance is not a reliable indicator of future returns. MER and fund size data reported from fund manager disclosures, reviewed quarterly. Always check the current PDS for the most recent fee and holdings information before investing. ETFLens does not hold an Australian Financial Services Licence. Always read the relevant PDS and consider seeking advice from a licensed financial adviser (AFS licence holder) before making any investment decisions.