A year since its launch, the superannuation arm of US passive investing giant Vanguard is pushing close to $1 billion of assets under management (AUM) – a result that local managing director Daniel Shrimski deems “really successful”.
Vanguard Australia passed the milestone of $900 million in AUM in its super fund late last year, almost doubling since the last public disclosure in May 2023. Shrimski believes this result was driven by the fund sticking to what it does best – listed investment management. However, he hasn’t ruled out the possibility of Vanguard Super venturing into unlisted assets completely.
“Maybe we will [invest in unlisted assets] down the track,” he tells Investment Magazine.
“There are a few things about unlisted investment that we’re wary of. One is that it’s a more costly investment approach. The second is transparency in terms of valuation… and the third one is just liquidity. Being a new fund, we’re mindful of that.”
This perspective is unlikely to change within the short to medium term, he says, flagging that he’s “very confident” in Vanguard Super’s ability to meet return expectations with its listed expertise regardless.
The comment comes amid renewed enthusiasm among other industry and retail funds in unlisted assets, as recent media reports indicated that many are on the lookout for cheap and mispriced opportunities due to volatile market conditions.
“We think our offer is a very, very compelling alternative to some of the other funds where they might have 20, 30 or 40 per cent in unlisted [allocation],” Shrimski says, bucking the sentiment.
“There are going to be years where the unlisted space does well, and there are going to be years where the unlisted space doesn’t over the long term, and that’s what we’ll focus on.”
The comments came amid debate, fueled by the previous Morrison government, around the AUM milestone at which a fund is considered viable or not. Stakeholders have variously talked about a threshold in the range of $20 to $60 billion, underpinning much of the extensive merger activity in recent years.
Speaking at the Investment Magazine Chair Forum in 2023, APRA deputy chair Margaret Cole reiterated her concerns about the sustainability of funds with under $10 billion AUM, with half facing challenges due to declining net cash flows and member accounts.
She also highlighted that compared to those under $10 billion, funds with greater than $50 billion have less administration fees and operating expenses.
Shrimski says the $1 billion AUM is a comfortable number for Vanguard Super one year into operation, but the plan is to “grow exponentially” from here.
“We plan to grow in an accelerated fashion and that will come off the back of a broader offer… but I think also it will come from different avenues to market,” he says.
“I’m confident that those [APRA] thresholds do not concern me when I think of where we’re at and where we plan to be.”
Vanguard Super’s new year growth strategy will be spearheaded its direct-to-member marketing, as well as an offering for its existing network of financial advisers.
A pilot program for advisers to utilise Vanguard Super for their clients is currently in market, and within the next two quarters, Shrimski says the online portal will be open for all advisers it works with, which is 12,000 or about 70 per cent of the profession in Australia.
“That’s a really big step forward for us,” he says, pointing out that advisers are Vanguard’s most loyal clients and customers.
These are complemented by an appetite for experimentation, as Shrimski flagged that Vanguard Super is seeking appropriate partnerships to broaden its distribution from 2024 and beyond.
While suggesting that mergers and acquisitions are not completely off the cards either, the fund will take its time to pick and choose the right opportunities.
“We think there are going to be opportunities for us, but were patient at the same time,” Shrimski says.
“The big thing for us now is to make sure that we can prove out our offer – I think we feel good about that a year in – and that we have operational stability, and we feel good about that too. We won’t judge success by year one, we will judge it by how things look in the next five and 10 years.”