Vanguard builds new fund in-house

Vanguard Investments has tweaked the composition of the ASX200 Index by excluding listed property trusts (LPTs) to form the basis of a new Australian share fund which aims to deliver an annual yield 1 per cent higher than the benchmark.

The fund will invest in Australian companies that are in the top 200 index and are paying higher than average dividends and franking credits.

Vanguard chief investment officer Eric Smith says the fund manager had to develop its own index for this fund as none was available.

“We took the top 200 index and excluded LPTs which gave us roughly 170 stocks for the fund,” he says.

“The fund will capture the characteristics of the target index, but with a bias to dividend paying companies to maximise the tax advantages of franking credits and to minimise realised gains,” Smith says.

Smith says the fund is aimed at investors who want an income stream, and self funded retirees and self-managed superannuation funds are prime targets for the new fund.

Initially Vanguard is launching the wholesale version with a minimum investment of $500,000, but the retail version should be available at the end of this month.

This will have a minimum investment of $5000 with fees starting at around 70 basis points.

For investors with more than $50,000 in the fund, the fees drop to 65 basis points and for those with more than $100,000, the fee is 40 basis points.