As Treasury gears up for another review of the Your Future Your Super performance test, Vanguard Australia managing director Daniel Shrimski has defended the test as a “really important consumer protection” and one that has “lifted the integrity of the superannuation system”.  

“Benchmarking against a market index – we don’t see that as radical and we don’t see that as a flaw in the system,” Shrimski told Investment Magazine sister publication Professional Planner’s Shape of Advice podcast. 

“We’ve had 17 superannuation funds eliminated because they couldn’t meet the standard. APRA came out with some numbers a few weeks ago in terms of Australians in underperforming funds. It was a million Australians, a million. Now it’s 8500 Australians in underperforming funds. That’s fantastic, and that’s cause for celebration.” 

But Shrimski also said that Vanguard would support changes to the test to encourage investment in emerging asset classes.  

“One of the things that we certainly support… these emerging asset classes that I think a lot of contrarians would say are unable to be invested in, you know, we absolutely support, with more data that’s now available in increasing the number of benchmarks. We think that’s a really positive enhancement to the test.  

“We also think that the 50 basis point buffer – we could increase that to something larger. I don’t know what the right number is, but again, it would allow investment into particular asset classes that might take time.  

“Those are the sorts of things that we would say would be enhancements to the test – but doing away with the test, watering down the test, we see as very dangerous, and we get nervous about going back to where we were – trustees not being held accountable, like they ought to be.”  

Vanguard Super, which now manages circa $4 billion, was established in late 2022 after Vanguard made the decision to withdraw from the low-margin business of managing large passive mandates for the established superannuation funds – a business that was quickly taken over by its competitors, including State Street.  

“I think it’s too early to say was that the right decision,” Shrimski said. 

“We promote long-term investing, and for us to make a call on that after three years feels premature. [But] we’re really happy with the start, and ultimately we’re an organisation that is here for the investor… When we’re getting very slim margins on mandates on mandates that we’re managing and we see product out there in the market for 90, 100, 110 basis points, that’s not us doing our best work for the Australian population. 

“So we said we’re going to go it alone. We’re going to make a long-term investment decision and go it alone, and that’s what we’ve done. Building a superannuation fund was a huge undertaking, a massive undertaking, but we sit here almost three years after launch and we’re really proud of what we’ve built so far, but it’s just the start.”  

Vanguard Super has also previously telegraphed that it may at one point invest in private market assets – at the right price – saying that they’re key to achieving true diversification when the vast majority of assets aren’t listed.  

“Right now we’re internally managing everything, and we absolutely see privates being part of the portfolio at some point in time,” Shrimski said.  

“I think, at $4 billion, we’re too small. I think we are in the listed environment, we’re doing what we have – in the most humble way – we have done well, both locally and globally, and we can do it at a low cost. As I said, I see it being a part of our future. But it would have to be privates at a low cost. That would be the condition. 

“If they’re not low cost, we won’t do it. And we’ll outsource. We’ll insource when we have the expertise and the scale; when we don’t have that, we will work with partners that are aligned and again, can support us in a low-cost environment.”