Vanguard Cash

Vanguard  

Investment Style: Passive enhanced

Vanguard Investments Australia Limited (Vanguard) is a wholly-owned subsidiary of The Vanguard Group, based in Valley Forge, Pennsylvania. The Vanguard Group, Inc. has a history of specialisation in public offer index management dating back to 1976. Vanguard Australia was incorporated in February 1996 to offer index management services to Australian investors, with investment management (excluding regional trading desks), operations and client servicing located in Melbourne.

Vanguard's philosophy is that any market is a zero-sum game in relative performance terms on a before-cost basis. The firm believes that a properly managed index portfolio will outperform most active managers in the long term. Vanguard seeks to provide the most cost-effective implementation of an indexed portfolio, tailored to each client's circumstances. The objective is to match the return on the benchmark closely before fees with low transaction costs.

Vanguard employs an optimisation process which allows the highly-efficient management of change, both index change and portfolio cashflows. The firm's view is that optimisation should result in low tracking error with superior after-cost returns than full replication. Vanguard strongly believes that the minimisation of costs is critical to success in managing passive portfolios. Optimisation of structure allows for the avoidance of the high costs associated with many small trades as well as working around the non-availability of assets and minimum transaction sizes.

In the case of cash, Vanguard seeks to enhance yield by the adoption of a modest structural bias to duration risk rather than through credit risk. This is achieved through the substitution of short-dated high-grade securities with slightly longer-dated securities of equivalent credit grade. This structural bias to duration risk relative to the UBS Australian Bank Bill Index is embedded in the notional index (the Vanguard Cash Plus Index) against which the firm passively manages the cash portfolio.

Vanguard Australia’s investment team is led by Joseph Brennan as Chief Investment Officer. The team operates in four divisions: Equities, Fixed Interest, Investment Solutions & Research, and Investment Risk. International and Australian fixed interest and currency management is the responsibility of the Fixed Interest team led by Roger McIntosh (Head of Fixed Interest).