New ETFs boosts diversification

Vanguard Australia’s four newly listed Diversified Index exchange-traded funds (ETF) will provide investors, including SMSF trustees, with greater access to the firm’s leading diversified portfolio strategies.

The diversified ETFs in the suite comprise conservative, balanced, growth and high-growth profiles, and are based on existing Vanguard Diversified Index Funds, where the established asset pool of non-listed multi-asset funds is collectively worth more than $7 billion.

Vanguard said the new suite represented a milestone in the Australian market as being the first ETFs allowing investors to gain diversification across and within all major asset classes, while offering a clear choice as to how much risk was taken on.

Each Diversified Index ETF provides extensive global exposure to around 6500 individual companies and more than 5000 fixed-income securities.

The annual investment cost is 0.27 per cent.

“Increasingly SMSFs understand the value of diversifying their portfolios that tend to be concentrated in Aussie equities and cash, and more have looked to ETFs for this diversification in recent years,” Vanguard Australia head of market strategy and communications Robin Bowerman told selfmanagedsuper.

“It is often noted that SMSFs are established by those who want more control over their investments.

“What this new suite of ETFs offers is the ability for SMSF trustees to diversify across multiple asset classes simply, at low cost, and aligned to one of four risk profiles.”

Bowerman said SMSF trustees may prefer to allocate a certain portion of their portfolio to a broadly diversified core solution, while devoting more time sourcing other specific satellite investments such as direct property or individual shares.

“For trustees, the process of regularly rebalancing back to a strategic asset allocation alone requires a significant commitment of time and incurs transaction costs,” he noted.

“One of the key benefits of these four diversified ETFs is that they rebalance automatically to their stated asset allocations.”

The launch of the four ETFs expands Vanguard Australia’s ETF offering to 22 funds, with total ETF funds under management of $9.4 billion.

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