Overlap
ETF overlap: when two funds hold the same companies
Two Australian ETFs can look different on the label and hold much of the same thing underneath. Overlap is the plain measure of how much.
What overlap means
An ETF is a wrapper. Underneath it is a list of companies and the share of the fund held in each. Overlap is what happens when two of those lists contain the same companies: a dollar in one fund and a dollar in the other end up in the same place.
It is a fact about holdings rather than a verdict on them. Either two funds share companies or they do not, and the proportion they share can be measured from the files their issuers publish.
How overlap is measured
For every company held by both funds, take the smaller of the two weights. Add those figures across all the shared companies and the total is the proportion of each fund that is duplicated by the other.
So if one fund holds a company at 8% and the other holds it at 6%, the pair share six percentage points of that company. Repeated across every name they both hold, the total is their overlap — a single figure between 0% and 100%.
Two things change the answer. The first is the date: weights are as at the day each issuer published its file, and a pair of funds on different publishing clocks can only be compared as at the older of the two. The second is what is being compared — fund against fund, or the actual dollars you hold in each.
Why Australian funds overlap so much
The Australian market is concentrated at the top. A market-capitalisation index of the largest 200 or 300 listed companies puts much of its weight in a handful of banks and miners, so two funds tracking different indices of the same market still meet in the same names.
The pattern repeats in predictable places:
- A broad ASX 200 fund and a broad ASX 300 fund hold nearly the same companies, weighted in nearly the same order.
- An Australian dividend-oriented fund and a broad Australian fund meet in the banks, because that is where the franked income is.
- A global shares fund and a US technology fund meet in the largest US companies, which are the largest weights in both.
- A diversified single-ticker fund such as VDHG or DHHF holds other ETFs rather than shares directly, so its overlap with those ETFs is the whole of the slice it allocates to them.
Overlap and concentration are different questions
Overlap is about a pair of funds. Concentration is about you: after every fund you hold is unwrapped and the dollars are added together, how much of the portfolio sits in one company.
The two come apart often. A pair of funds with modest overlap can still leave one company as the largest single position in a portfolio, because a small weight in a large holding outweighs a large weight in a small one.
The words on the page
- Weight
- The share of a fund held in one company, as published by the fund's issuer.
- Market-capitalisation index
- An index that weights companies by their market value, so the largest companies carry the most weight.
- Look-through
- Unwrapping a fund to the companies underneath it.
What this can't tell you
- An overlap figure is a measurement at one date. Where the funds publish on different clocks, it is only as current as the older file behind it.
- It says nothing about fees, currency hedging, distribution frequency or the franking profile of what each fund pays.
- Index rules differ even where the holdings look alike, so two funds holding the same companies can weight them differently the next time each index is reviewed.
- Where an issuer discloses only part of a portfolio, overlap covers only the disclosed part.
Where to go next
Written and signed by a named author, dated the day it was last looked at. How we source our data · Editorial policy