The Australian superannuation industry could be set for one of its biggest shake-ups in decades. That's what the entry of the massive fund management company Vanguard into the super sector could mean. Vanguard is one of the largest asset managers in the world.
Many ASX investors would be familiar with some of Vanguard's popular exchange-traded funds (ETFs). Indeed, the Vanguard Australian Shares Index ETF (ASX: VAS) remains the most popular ASX ETF on our share market today.
But until now, Vanguard has not been directly involved in the Australian superannuation industry. Until a few years ago, the company did offer its products indirectly through other super providers. But the company has ditched these avenues in preparation for its entry into the market itself.
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Vanguard primed to announce new superannuation products
This may have just gotten one step closer too. According to reporting in The Australian today, Vanguard has just received regulatory approval to "launch a suite of superannuation products" in the Australian market from the Australian Prudential Regulation Authority (APRA).
Vanguard's Australian chief executive, Daniel Shrimski, told The Australian that "our journey is just beginning… We think the simplicity, the low cost and the (investment) expertise that we will provide will resonate".
As a well-known provider of ETFs, many investors might assume that these ETFs may play a major role in what Vanguard will offer super customers.
That would be a safe assumption, according to Shrimski. He said that Vanguard's products will be "more fund-based but we think ETFs will certainly be a part of the longer-term solution".
So what ETFs might Aussies be able to invest in under a Vanguard superannuation product? Well, the Vanguard Australian shares ETF would be a good start.
As Vanguard's most popular product, and the only one that covers either the S&P/ASX 200 Index (ASX: XJO) or the S&P/ASX 300 Index (ASX: XKO), it would be a safe bet that VAS is among the flagship ETFs that Vanguard will offer up.
Which Vanguard ETFs could be on offer?
But the Vanguard MSCI Australian Small Companies Index ETF (ASX: VSO) would be another strong candidate. VSO covers around 210 of the smaller shares on the ASX.
Forget BHP Group Ltd (ASX: BHP) and the big four banks. VSO's largest holdings include companies like Lynas Rare Earths Ltd (ASX: LYC), Carsales.com Ltd (ASX: CAR) and Bendigo and Adelaide Bank Ltd (ASX: BEN).
That could complement Vanguard's other ASX offer, the Vanguard MSCI Australian Large Companies Index ETF (ASX: VLC) nicely. VLC is an ETF that covers only the top 20 largest companies on the ASX.
Income investors might appreciate the inclusion of the Vanguard Australian Shares High Yield ETF (ASX: VHY).
But Vanguard has many other ETFs that look to shares beyond our shores.
The Vanguard MSCI International Shares Index ETF (ASX: VGS) is another probable shoo-in. This is Vanguard's flagship international shares ETF. VGS covers almost 1,500 individual shares hailing from more than 20 different advanced economies.
These include Canada, France, Japan, the United Kingdom and Germany. Saying that, it is heavily dominated by US tech giants like Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT) and Amazon.com Inc (NASDAQ: AMZN).
Looking outside the ASX and the US
But we could also see the Vanguard FTSE All-World ex-US ETF (ASX: VEU) offered as well. This fund is similar to VGS, but excludes US shares. In their place, many emerging economies are represented, including India, Brazil, and Saudi Arabia. Overall, this ETF has more than 3,500 individuals holding within it.
Ethically-minded investors might appreciate if there was the option to select the Vanguard Ethically Conscious International Shares Index ETF (ASX: VESG).
More regionally specific ETFs from Vanguard are also possibilities for inclusion in its superannuation offerings. This includes the Vanguard FTSE Europe Shares ETF (ASX: VEQ), the Vanguard FTSE Asia ex-Japan Index ETF (ASX: VAE) and the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE).
Other Vanguard ETFs covering different asset classes outside shares could also be potentially available. These might be the Vanguard Global Infrastructure Index ETF (ASX: VBLD). As well as the Vanguard Australian Fixed Interest Index ETF (ASX: VAF) for access to fixed-interest bond investments.
So it's likely that new Vanguard super customers will have a plethora of ETFs to choose from when the company eventually brings its new superannuation products online. We don't yet know when this will be. But with Vanguard now gaining regulatory approval, it's probably going to be sooner rather than later.
