Key points: 

  • Vanguard’s offering provides a range of investment options. In this video, we focus on its Lifecycle investment option.
  • In typical lifecycle investing, an initial investment is made, based on investor age, into a well-diversified mix of investments. Over time you end up with more defensive assets and less growth assets.
  • The two strategies differ in their investment approach. Vanguard’s strategy is not presently designed to ‘beat the market’—the underlying assets are simply trying to generate a return in line with some large indexes.
  • AustralianSuper, uses an ‘active’ approach to try and beat the market.


In-depth analysis on Vanguard and AustralianSuper can be found here.

Transcript: 


Annika Bradley: So, Vanguard's default investment option, their SaveSmart option, is actually a Lifecycle investment option. So, what do I mean when I say that? The Lifecycle investment option takes into account the investors' age, and it sets the growth and defensive mix of assets based on that age. So, the growth mix of assets is, say, your investments into shares and property, and your defensive mix is your cash and your bond investments. And over time, that mix of defensive and growth assets actually moves as you age. 

In terms of AustralianSuper's investment strategy, it takes a different approach, and it also has a few more tools in the toolkit. So, it invests in unlisted assets such as private equity, unlisted infrastructure, think Sydney Airport, and it also uses active management. So, what that means is, is it's trying to beat the market, whereas Vanguard's investment strategy is very focused on matching market returns for a low cost. Aussie Super for those additional tools in the toolkit for those unlisted assets, you are paying higher investment fees and costs, whereas Vanguard's fees and costs are lower as you are just from a match that index return.

In order to compare I took a look at the AustralianSuper High Growth option and the Vanguard 47 years and under option. So, a Lifecycle investment option, which is Vanguard's option, is a little bit more difficult to compare because as I said that asset allocation changes over time. But when I look at the performance of both Vanguard and Aussie Super's options, they've both generated really strong returns for investors over time.

And the other thing to pay attention to is the administration fees. So, the administration fees of Aussie Super are lower than Vanguard, and the reason for that is Aussie Super have $250 billion of assets under management, which means that they're able to offer administration at a lower cost at the moment than Vanguard. And Vanguard do have a good track record in passing through costs to their investors over time. They've done this in many of their investment options, and I'd expect that over time, Vanguard's admin fees should come down. But at the moment, Aussie Super's admin fees are cheaper than Vanguard's admin fees.

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