Vanguard enters super fund field: global giant to launch low-cost MySuper product

The $10 trillion Vanguard funds manager will launch a low-cost Australian MySuper product in a move that could challenge the sector’s biggest players.

Vanguard Australia’s chief executive Daniel Shrimski, above, says ‘it will be an important strategic initiative for us in Australia for decades to come’. Picture: NCA NewsWire / Luis Enrique Ascui

The $10 trillion Vanguard will launch a low-cost Australian superannuation fund in a move that could challenge the sector’s biggest players.

The funds manager, credited with the creation of the first index fund for retail investors, will make its first foray into direct super with a low-cost MySuper product later this year.

“It will be an important strategic initiative for us in Australia for decades to come,” said ­Daniel Shrimski, Vanguard Australia’s chief executive.

“We are very excited about the superannuation space.”

The fund is believed to be the first new superannuation fund registered with the Australian Prudential Regulation Authority in the past five years.

Mr Shrimski took over as chief executive of Vanguard Australia in October, returning to Melbourne after almost five years working in the investment manager’s head office at Valley Forge, near Philadelphia, as chief financial officer of its retail business.

The second-largest funds manager in the world – after New York-based BlackRock – and one of the world’s largest providers of exchange-traded funds, Vanguard has been in Australia for the past 25 years with $120bn of funds under management locally.

The launch of the super fund, expected in the second half of the year, is in line with Vanguard’s strategic shift in Australia away from an initial focus of supplying products such as indexed funds – including ETFs – to major institutions in Australia, and towards the increasingly affluent local retail investment market.

“As we pivot into the retail space, superannuation will be a huge part of that,” Mr Shrimski told The Australian.

“We believe the biggest impact we can have in the Australian market is to deal directly with ­investors or through like-minded advisers.

“It is a natural step forward for us to enter into the direct (superannuation) space.

“It is a long-term investment for us and we need to get it right.”

The initial fund in Australia will be a low-cost MySuper product. MySuper products currently make up $923bn of the $3 trillion market.

Vanguard has been boosting its links with financial advisers in Australia in recent years as part of its strategy of connecting with ­retail investors.

“We now have 60 per cent of advisers in Australia with at least a dollar of their clients’ money invested in Vanguard products,” Mr Shrimski said.

He said he believed that Vanguard already had a good brand in the Australian financial market, but that it was moving to boost its reputation in the retail investor market.

The company launched a brand campaign in Australia in April last year under the leadership of Louise Eyres, the former chief marketing officer of Sport Australia and group general manager marketing at ANZ who joined Vanguard as chief marketing officer in late 2019.

Vanguard is known for its low-cost investment products.

Berkshire Hathaway chief executive Warren Buffett, one of the world’s most influential investors, has previously advised those who do not know how to invest to instead buy into a Vanguard index fund.

“We like the fact that he is a Vanguard fan,” Mr Shrimski said of Mr Buffett.

Vanguard began its operation in Australia with indexed funds, moving into ETFs a decade ago. It is now the largest provider of ETFs in Australia.

“Index funds and ETFs are great products for Australian investors,” Mr Shrimski said.

“They are low cost. And one of our investment philosophies is that cost matters.

“An index fund can provide a client with 100 stocks all in one as opposed to having to buy each of the stocks individually.

“Rather than trying to find a needle in a haystack, you can just buy the haystack.”

Vanguard launched an investment platform for personal investors 18 months ago that has attracted middle to up-market retail investors in Australia.

“We have attracted a lot of mass affluent customers and some self-managed super funds,” Mr Shrimski said.

He said the launch of the super fund would give Vanguard a business in superannuation and non-superannuation investments.

Vanguard was also looking at the potential of expanding in Australia through acquisitions and partnerships. “Inorganic activity is something we will look at as opportunities arise,” he said.

“It is not something we have done a lot of at Vanguard, but we will look at opportunities to partner with other organisations if it makes sense.”

Mr Shrimski said Vanguard was “not naive” about the ­challenges of entering directly into the superannuation market in Australia.

“We know there have been a lot of people who have been in the market for a long time, but we feel like we have a strategy to acquire members and we think we will have an offer which will be differentiated in the market and one which will resonate with Australians,” he said.

Vanguard in Australia has put on another 280 contractors and staff over the past two years, boosting its local staff to about 800 as it gears up for a larger footprint in the retail sector.

Mr Shrimski said that, while Vanguard in the US was also ­involved in providing financial advice for its clients, the Australian arm had no current plans to do so.

He said the company was currently happy to work through ­financial advisers in Australia.

But he said it was not out of the question that the Australian arm could also move into providing ­financial advice at some point in the future given its expertise in the area in the US.

“Offering financial advice ourselves is not something we are ready for, given the focus we already have in Australia,” he said.

“But there is a huge opportunity there and the need for proper financial advice at an ­affordable cost is something which still needs to be solved in the Australian market.”

Mr Shrimski is a 15-year veteran of Vanguard.

A former finance director of GE Capital in Australia, he joined Vanguard as chief financial officer at its local head office in Melbourne in 2011 before moving to its global head office in the US, where he spent almost five years as chief financial officer of its ­retail business.

“The business in Australia today is very different from the business I left,” he said. “I was given a great opportunity to lead the business here. The timing couldn’t have been better.”