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Vanguard aims for DC market

Vanguard is looking to break into the UK defined-contribution pension market within the next three years following interest from scheme providers about including the firm’s index trackers in their investment line-up.

Head of retail Peter Robertson says six of the top 10 DC providers – insurance companies mainly – have approached the firm to ask how the funds might work on their platforms.

Robertson says plans to break into the DC sector in the UK were accelerated, in part by a potential new competitor in Black Rock following its purchase of Barclays Global Investors earlier this year.

He says: “DC is something that we envisage doing over the next two to three years. BGI was not a competitor in the past because it did not do the admin. Now Black Rock can do the admin, the active and the passive, maybe an alternative passive provider is a good thing.”

Vanguard expects to add a range of active funds later in 2010 as well as exchange traded fund versions of its mutual funds.

Its 11 passively managed funds are available in the UK through a number of fee-based adviser platforms as well as consumer platform Alliance Trust Savings but they are still not on some of the bigger fund supermarkets such as Skandia, Fidelity FundsNetwork and Cofunds due to their rebate and commission-based structure.

Robertson says: “The reason we are not on them is because they have got a lot of work to do to change their model for the retail distribution review. Once they are ready for it, adding them is natural but at the moment the rebate discussion is pointless. If it takes a while to get on platforms, it takes longer still to get on the DC side.”

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