Vanguard's policy shift coincided with Vanguard's initiative to re-enter the retail superannuation market and offer their own product direct to investors. This move most likely capitalises on the phenomenal growth of exchange traded funds (ETFs) in Australia and the success of Vanguard Personal Investor through which retail investors can, for very low fees, access a range of Vanguard ETFs and managed funds.
Vanguard's decisions are impacting their local footprint, at least in the short term. In June 2020 Rainmaker estimated they had $61 billion in institutional mandates. But by June 2021, Rainmaker estimated this has almost halved to $31 billion.
This strategic shift has created a windfall for a small number of other funds managers. SSGA's total institutional super fund mandates increased $19 billion through the period, BlackRock's increased $12 billion and Macquarie Investment Management experienced an $8 billion lift.
"Vanguard is a very significant funds manager in Australia. For them to make such a bold move has significantly impacted the market. The biggest winners so far appear to be other leading low-cost index funds managers, State Street Global Advisors and BlackRock," said Alex Dunnin, executive director of research and compliance at Rainmaker Information.
In the year since Vanguard's announcement, the funds that institutional investment managers are competing for increased from $2.7 trillion to $3.2 trillion.
Of the $61 billion managed by Vanguard, international equities was the largest asset class with 29%. Their next largest asset class was 'other' and Australian fixed interest both with 24% and Australian equities with 14%. International fixed interest, cash and property were the remaining 8%.
Among the super funds with mandates previously being managed by Vanguard, SSGA was the investment manager with the most gains in mandates from Aware Super, Sunsuper, and QSuper.
"These super funds are amongst the biggest, best performing and lowest cost super funds in Australia. There's only a small number of investment managers with sufficient scale to step into the shoes of Vanguard. It needs to emphasised as well that they haven't shifted all their Vanguard business to their new investment managers, at least not yet," said Dunnin.
First Sentier Realindex and Harris Associates were the managers with significant mandates gained in the period from Cbus and AustralianSuper respectively. Blackrock's gains appear to have been smaller and spread across multiple funds.
Notably, all the above external managers operate predominantly in the equities asset class.
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Total risk market inflows were down a marginal 0.6% over the year to June 2024, decreasing from $18.3 billion to $18.2 billion.
Dual access ETPs, which are transacted both on stock exchanges and off-market through funds managers, can cost four times as much as the rest of the Australian ETP market.
