Vanguard is seeking to bolster its funds under management to capitalise on widespread disillusionment with active managers.
“Institutional investors have embraced and understood our approach for many years,” says Joseph Brennan, chief investment officer, Vanguard, Asia Pacific.
“The adviser and retail community are now more interested in index options” because regulatory pressure is seeking to cap fund management costs.
There is also widespread disillusionment with active asset management following losses since the global financial crises in 2008. In the four years to December 31, 2011, the median growth fund had annual returns of minus 1.7 per cent, according to analysts at Chant West.
Brennan says index funds are 50 basis points to 100 basis points cheaper than charges levied by active fund management companies.
About 5 per cent of Australia’s retail investment community invest in index funds compared with as much as 35 per cent of institutional investors, he says.
Australia has about $1.8 trillion in assets under management and Vanguard manages about $65 billion.
Approximately 12,000 of the 16,000 of the country’s wealth advisers use Vanguard funds.
“That’s only growing,” says Brennan. “Low-cost investing is always in vogue. Differences in costs always give passive an advantage over active.”