Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Vanguard gets APRA go-ahead for super play
Vanguard has been plotting its entry into superannuation since at least 2019 and has previously talked down suggestions of a holdup in the launch. With the regulatory green light from APRA, it’s full steam ahead.
“We are delighted to confirm that APRA has issued an RSE licence to Vanguard Super Pty Ltd,” a Vanguard spokesperson said on Friday (August 26). “This important regulatory milestone is the result of a lot of hard work from the Vanguard team and close engagement with APRA throughout. There is more to be done before we publicly launch Vanguard Super, however we are on track to open our superannuation offer to the public by the end of the year.”
The superannuation industry – and its discontents – have waited with bated breath for Vanguard to launch its product Down Under. With around US$10 trillion FUM globally, Vanguard is expected to introduce more fee competition into a market already known as one of the most fee sensitive in the world, and already enjoys significant brand awareness with younger investors, many of whom have made its ETFs the cornerstone of their investment portfolios. Vanguard Super is headed up by Australian born Michael Lovett (photo at top).
Vanguard was previously rumoured to be among a host of contenders for BT’s superannuation assets, which ultimately went to Mercer, and has signalled a desire to build scale both organically and through acquisitions in the rapidly consolidating superannuation market. Its move to launch a super product saw it shed a host of passive mandates, including a partnership it forged with Sunsuper in 2015 that also saw it provide guidance on member services to the fund.
“Harnessing the wider Vanguard group’s global investment expertise and more than 25 years’ experience serving Australians, we believe we have created a fund that will keep super simple, transparent, and effective for our future members. We are looking forward to sharing more details very soon,” the spokesperson said.
Vanguard has tapped Citi-backed fund administrator GROW Inc (formerly GROW Super) to run its back office. When Vanguard launches it will add impetus to the nascent trend for a super admin system based on distributed ledger technology (DLT). GROW built its DLT system on the R3 Corda blockchain platform, which has also been in use by the firm’s client Mercy Super in Queensland.
David Baxter of GROW Inc, who has been with the firm since its start in 2017, initially as chief technology officer and now going by the title of ‘chief evangelist’, says the company decided to build its own admin system to address the challenges encountered in running GROW Super.
“When we started out, we discovered that there were no modern interfaces available for us to use. People were still passing around CSV files. The big players didn’t seem interested in open architecture, so we looked around,” he says.
With additional reporting by Greg Bright.
