There’s a new superannuation fund in town, and with almost everyone crying out for even a little bit of good news in the world of finance, this could well be it.
Super’s new kid on the Australian block goes by the name of Vanguard and, while it is new in terms of super fund management here, it’s a name known around the world and especially in the US, where it is a leading player among investment funds.
Vanguard is the world’s largest provider of mutual funds, with about $7 trillion in global assets. The Australian Financial Review has suggested that is an underestimate, describing the company as an “$11.3 trillion investor”.
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The name Vanguard is not entirely new to Australia, though. The company has been providing services to incumbent super funds for quarter of a century, through money management for third-party super funds. Now, though, it will compete directly with those existing Australian super funds.
So how is that good news for Australian super members? Well, Vanguard is bringing a new membership model to the table: the fund will not be owned by shareholders but by the super members themselves, which Australian managing director Daniel Shrimski says will provide members with lower fees, among other benefits.
“There are no external shareholders,” he says.
“Profits get reinvested back into the business … or delivered through price reductions to the end investor. We will continue to lower fees; I think I can say that confidently.”
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Vanguard’s model is new to Australia but has been used for nearly half a century overseas.
“That same philosophy that our investors have benefitted from for 45 years in the US… [will] certainly be a part of our [approach] as we launch super,” Mr Shrimski says.
The model places it in some respects between the industry and retail fund models.
When will Australians be able to move to Vanguard?
Australia’s corporate regulator gave Vanguard approval for an initial cohort of 50 employees and their family members to join in September, and the company says it expects to launch publicly by year’s end.
On the company’s home page, a message states, “Vanguard Super coming soon”, along with a link to a page on which prospective members can sign up for ‘Vanguard Super updates’.
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Vanguard will be looking to grow its membership very quickly, given the generally accepted belief in the industry that the threshold for viability in Australia is at least $30 billion. The largest industry super funds here currently each manage in excess of $200 billion.
Mr Shrimski believes Vanguard is up for the challenge: “We’re going to go to market with a compelling offer. We’re certainly going to give Australians something to think about. We want Vanguard to be a household name like it is in the US.”
Given Vanguard’s already behemothic nature, it’s hard to see Mr Shrimski’s wishes not materialising. In any case, Vanguard’s launch will make 2023 a very interesting year for superannuation in Australia.
What do you think of Vanguard’s super model? Will you explore the possibility of taking up its offer? Why not share your experience and thoughts in the comments section below?
