The firm’s 2026 Adviser Portfolio Trends Report, which analysed more than 100 adviser portfolios, found widespread use of disciplined core–satellite approaches and a more balanced positioning across equity exposures compared with previous years.
Active and indexed allocations were relatively evenly split at 49 per cent and 44 per cent, respectively, while total portfolio costs were generally contained within a range of 0.30 per cent to 0.75 per cent.
However, the report suggests that beyond these headline settings, portfolio construction decisions are introducing complexity that may not translate into improved outcomes.
“What we see in the data is encouraging at a surface level, advisers are getting most of the big decisions right,” said Rachel White, head of financial adviser services at Vanguard Australia.
“But when we look deeper, there are some quiet portfolio construction behaviours that have become normal over time, and those behaviours carry consequences for diversification, risk and long-term returns.”
The core–satellite framework remains widely adopted and generally effective, with most portfolios holding two to three satellite allocations per asset class alongside a diversified core. According to Vanguard, issues begin to emerge where additional satellites are introduced without a clearly defined role.
Some portfolios were found to include more than eight satellite allocations, increasing the risk of overlapping exposures, unintended style drift and higher overall costs.
“The issue is not that advisers are using satellites, it is how deliberately they are being used,” White said.
“The strongest portfolios clearly define what belongs in the core, why each satellite exists, and how much active risk clients are actually taking on.”
Fixed income positioning was identified as a key area of concern. The report found advisers allocate, on average, 65 per cent of fixed income exposure to Australian assets, compared with 35 per cent globally.
Given Australia represents a small share of the global economy and has a bond market concentrated in financial issuers and floating-rate credit, this positioning may reduce diversification benefits.
“Fixed income is supposed to diversify equity risk, not replicate it,” White said, noting that global bonds can provide broader exposure across issuers, yield curves and inflation environments.
Cash allocations were also elevated, averaging 21 per cent of fixed income exposure. While liquidity remains important, Vanguard suggests higher long-term allocations to cash may reduce access to term premia and limit defensive benefits typically associated with duration.
Alternatives were identified as the most expensive component of portfolios, with average costs of 1.46 per cent per year. The report found that outcomes across alternative strategies were mixed, with some private market investments underperforming more traditional equity benchmarks despite higher fees.
“Cash is a useful liquidity tool, but it is not a long-term return driver,” White said.
“In regards to alternatives, their inclusion does not automatically mean better outcomes — in many cases they raise costs and complexity without clearly improving long-term results.”
Across the portfolios analysed, Vanguard found the most consistent outcomes were linked to adherence to core investment principles, including clear asset allocation, strong diversification, limited use of high-conviction satellites and disciplined cost control.
“Markets change, but the drivers of long-term outcomes do not,” White said.
“Asset allocation, diversification and costs still do the heavy lifting.”
