Vanguard Australia is listing its four Australian Diversified Index Funds in ETF format, in a move that will challenge local robo-advisors. They are:
  • Vanguard Conservative Index ETF (VDCO)
  • Vanguard Balanced Index ETF (VDBA)
  • Vanguard Growth Index ETF (VDGR)
  • Vanguard High Growth Index ETF (VDHG)
Each of these ETFs is essentially a portfolio wrapped up in an ETF. Each fund offers exposure to Australian shares, international shares, fixed income, cash, hedged equities - and some others.

Exposure to different asset classes varies between the funds. The most conservative of them (VDCO) gives 90% exposure to income and 10% exposure to equities. VDHG has the ratios the other way around, with 90% equities and 10% income. VDBA and VDGR are somewhere in between.

What's more interesting about these products is how exposure is structured. Each Diversified Index ETF is a share class of an existing Vanguard Diversified Index Fund, meaning ETF investors can tap into the benefits of an established asset pool, collectively worth more than $7 billion, through Vanguard's existing range of non-listed multi-asset funds.

Analysis

The listings will come as a challenge to robo-advisors, which offer ETF portfolios that give similar asset class exposures at a similar price. Vanguard is often seen as the primary challenger to robo-advisors, given that Vanguard runs the largest robo-advisor in the world by far. Independent robo-advisors have the added features of selecting between ETF issuers and automated backend processes.

Issuers in other countries and in Australia have listed similar products. ETF Stream reported earlier this year that Germany's Commerzbank had listed the Vermögensstrategie-ETF, which offers German investors portfolios as ETFs, by making a big ETF made up of lots of little Commerzbank ETFs.

ETFs have always threatened portfolio builders and asset managers.