Vanguard Investments Australia Limited - Australian Listed Property Trusts

The Vanguard Group has over A$956 billion in funds under management, as at 31 December 2003.

Mandate

Australian Listed Property Trusts

Corporate Overview

The Vanguard Group is based in the US and has been managing funds in an indexed style since 1976. The firm was one of the pioneers of the indexed approach to investing and is the world's second largest provider of mutual funds.

Vanguard set up operations in Melbourne, Australia in 1996 as Vanguard Investments Australia Ltd.  With a crew of over 90 people, the Australian operation manages all aspects of the investment management function for over $18 billion in assets for clients in Australia, New Zealand and Asia.

Investment Process Description

Replication of the S&P/ASX200 Property Trust Index
Vanguard believes that investment markets are a "zero sum game" - investors can only out-perform the market at the expense of other investors under-performing - and hence properly managed index portfolios will outperform most active managers, after costs, over the long term.

Vanguard passively manages a portfolio of approximately 30 stocks on behalf of MLC using its optimised replication technique. This strategy is designed to replicate the performance of the S&P/ASX200 Property Trust Index, achieving very broad diversification with low turnover, reducing the impact of transaction costs and taxation. Purchases and sales of stock only occur in response to changes to the Index and as a consequence of cash flows.

The Vanguard Australian investment team is very experienced in the management of index portfolios and has the quantitative investment skills and trading practices required to build optimal, low cost portfolios.

Why Use Optimised Replication?

The S&P/ASX200 Property Trust Index contains approximately 30 stocks. Vanguard's approach, using optimised replication, reduces the tracking error risk of the portfolio (volatility of performance relative to index) by holding most or all of the index stocks very close to their index weights. It optimises the purchases and sales of stocks-in response to index changes and cash flows-to reduce the number of trades (compared with full-replication) and hence the fixed costs of trading.  The approach also reduces the realisation of capital gains and hence the distribution of gains to investors.

MLC utilises The Vanguard Group because they are a world leader in index based equity management.

Key Investment Personnel

Jeremy Duffield - Managing Director
Prior to founding Vanguard Investments Australia Ltd in 1996, Jeremy Duffield was Senior Vice President of The Vanguard Group from 1986. He joined Vanguard in 1980, as Assistant to the Chief Executive Officer, John C. Bogle, and in 1982 became responsible for new fund development. Jeremy has also been responsible for Vanguard's Quantitative Equity Group (quantitative equity management) which manages Vanguard's share index Funds. Additionally, his responsibilities included business planning, corporate communications, personal financial services and portfolio review. Prior to joining Vanguard, Jeremy was Assistant Economist at the Federal Reserve Bank of Richmond, Virginia. Jeremy was born and grew up in Australia and has spent 21 years in the U.S. before returning to Melbourne.

Eric Smith - Chief Investment Officer, BSc (Hons), MBA (AGSM)
Eric Smith has the principal responsibility for Vanguard's investment management strategy and implementation. Considered one of the best index investment specialists in the country, he brings a wealth of local expertise to Vanguard. Since joining Vanguard in 1996, he has built a team of 9 investment professionals. The team manages over $18 billion in index portfolios covering domestic and international equities, fixed interest and cash. Prior to joining Vanguard, Eric was the Manager Quantitative Investments at Commonwealth Funds Management.

Mathew McCrum - Head of Fixed Interest, BBus (BkFin), DIP (Treas), MAppFin (Melb)
Mathew joined Vanguard in December 1996. He and his team are responsible for the management of domestic and international fixed interest and cash portfolios and currency hedging programmes for international fixed interest and equity portfolios. Mathew's responsibilities include the continued development of the "interest rate" portfolio management process. Prior to joining Vanguard, he worked for seven years at the Treasury Corporation Victoria (TCV) as the Quantitative Analyst for the main portfolio.

Roger McIntosh - Head of Equities, BSc, MAppFin (Melb)
Roger and his team are responsible for the management of Australian and international equity portfolios. Roger joined Vanguard in April 1999 as Quantitative Research Analyst. Due to the rapid growth in Vanguard's funds under management and Roger's proven ability, he was promoted to Portfolio Manager in December 1999 and to Manager Equities in September 2000. Prior to joining Vanguard, Roger was Manager Quantitative Services for the Treasury Corporation of Victoria.

Alla Kolganova - Senior Portfolio Manager, MSc, PhD, CFA
Alla joined Vanguard in February 2000 as an Assistant Portfolio Manager.  Having quickly gained portfolio management skills, she was soon promoted to her current position where she is responsible for the day to day management of domestic equity portfolios, including listed property.  Prior to joining Vanguard, Alla was a member of the research and development group at County Investment Management where she was responsible for conducting original research, developing investment products and designing quantitative investment tools.

This information is solely for the use of authorised investment advisers and is not intended for distribution to investors.

The information contained in this material has been prepared by MLC Limited (ABN 90 000 000 402) and MLC Investments Limited (ABN 30 002 641 661) and is current as at 30 June 2003.

This article/website is intended to provide general information only and has been prepared without taking into account any particular persons objectives, financial situation or needs.  You should obtain a Product Disclosure Statement relating to any financial products that may be mentioned in this article/website and consider the Statement before making any decision about whether to acquire the product.