Vanguard Australia yesterday announced it would revise the strategic asset allocation for its suite of diversified funds from 1 July, which in turn would help trustees with the diversification needed to achieve their retirement goals.
Many of the changes flagged for the diversified funds, predominantly used by SMSFs and financial advisers, were aimed at addressing concentration risk.
“Research consistently shows concentration risk within SMSF portfolios, specifically home-country bias,” Vanguard Australia head of market strategy and communications Robin Bowerman told selfmanagedsuper.
“Diversified funds represent an opportunity for trustees to achieve broad diversification both across and within asset classes through a single fund, matched to their risk tolerance.
“The revised asset allocation of the Vanguard diversified funds will further enhance this diversification by reducing listed property exposure to bring it in line with a market capitalisation weighting, and by increasing the exposure to international assets across equities and fixed income.”
In addition to the asset allocation revision, Vanguard will also lower the management expense ratios (MER) across five diversified wholesale funds, in line with the investment manager’s mission of long-term investing.
“A primary reason for SMSF establishment is the desire to manage costs, so the reduction of expense ratios across this suite of products will help give trustees the best chance of meeting their retirement goals, ultimately leaving more returns within their fund,” Bowerman noted.
“Using diversified funds as the core of a portfolio is efficient for trustees as they periodically rebalance to stay in line with the asset allocation, reducing some of the time and effort required to manage the fund.”
Vanguard’s range of diversified funds invests in a number of its underlying index funds.
The multi-asset funds align with four risk profiles – conservative, balance, growth and high growth – which give investors the option of building portfolios based on their risk appetite, while the Vanguard Diversified Bond Index Fund is primarily suited to investors focused on generating steady income.
Vanguard Australia will have lowered MERs on 10 funds this year when this round of reductions takes effect on 1 July.
The diversified funds were a core product offering that allowed investors to access several of its high-quality index funds in a single transaction, Vanguard Australia head of product and marketing Evan Reedman added.
“They represent both Vanguard’s commitment to low cost and our disciplined and sophisticated investment processes,” Reedman said.
“Vanguard regularly reviews its full range of funds to see where we can use efficiencies of scale to bring the cost of investing down for our clients.
“This means they get to keep a higher share of their returns, which ultimately helps them in realising their investment goals.”
