Vanguard has reportedly been accused of charging high fees and providing limited transparency to unit holders in its Australian Fixed Interest Index Fund.
The Australian Financial Review is reporting a review of the fund by research house Lonsec found Vanguard charged investors “less attractive” management fees than its peers.
The $9 trillion investment fund manager also failed to disclose daily weightings of the underlying holdings within the fund, reducing “the overall transparency of the fund compared to other passive products”, according to the review.
The Financial Review said Lonsec analyst Hewad Safi downgraded the 24-year-old fund and the Vanguard Australian Fixed Interest Index Fund had its “highly recommended” status removed.
This means the product is now considered an “appropriate entry point” to the asset class instead of a “preferred entry point”.
“The fund’s management fee is 0.04 per cent more expensive [compared] to Vanguard Australian Fixed Interest Index ETF, which is structured as a separate unit class of this fund,” the review concluded.
“Further, the fund’s [management expense ratio] is less attractive than its peer group given fee compression in the sector.”
The Financial Review reported a Vanguard spokeswoman said the fund’s rate card was not in breach of the Philadelphia-headquartered company’s stated commitment to low fees and transparency.
“There are differences in costs to manage ETFs and managed funds so there are often slight variances in the cost of different share classes,” she told the Financial Review.
“However as an across the board, low cost leader we are confident our high quality funds, including our Australian Fixed Income Index Fund, continue to represent value for money for investors.”
She said the product, which has $9 billion in assets under management, was one of its largest and most popular in Australia, including among its key constituency of professional investment advisers.
“The rating change does not impact advisers’ ability to invest in this fund,” the spokeswoman said.
The Fund invests in high-quality, income-generating securities issued by the Commonwealth Government of Australia, Australian State Government authorities and treasury corporations, as well as investment-grade corporate issuers.
