The role of global equities – for Australian investors

Executive summary. Global equities excluding Australia represent over 96% of the global market capitalisation (market cap) as at 31 December 2012, which makes a case for Australian investors to take advantage of diversification opportunities offshore. Global equities as a part of a diversified portfolio, that also includes Australian equities, can help lower portfolio volatility over time.

In the last twenty years, investment in global equities by Australian investors increased over three-fold from AUD38.015 billion to AUD123.338 billion but that is in line with the relative growth of the markets.1 The home country equity bias in Australia, which remains very strong relative to other countries (over 18 times the domestic equity market cap), continues to have a major impact on global investment.2

In this paper we explore the history of the Australian equity market relative to global equity markets – the home country equity bias; the benefit of global equities; the impact of foreign currency on domestic investors; the costs of investing in global equities; and the expected risks and returns.

Based on this analysis we conclude that:

• Investorsshouldconsideramaterialweightingtoglobalequitiesasapart of a diversified portfolio strategy.

Authors

Rosemary Steinfort,

Paul Chin

Vanguard research April 2013

Connect with Vanguard™The indexing specialist > vanguard.com.au > 1300 655 102

1 ABS, Balance of Payments and Global Investment Position, Australia, June 2012 as at December 20122 Steinfort, Rosemary and Alexis Gray, 2012, The role of Australian equities and the impact of the home country equity bias,

The Vanguard Group

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Australian investors and the equity market

Historically, Australian investors tended to have a concentrated holding in the domestic equity market. In contrast, the Australian market for many years has represented less than 3% of the world market cap. Notably, in mid 2007 the Australian market cap passed 3%, reaching 4% by 2010. It has since fallen back to about 3.8%3. The period after the global financial crisis saw the Australian equity market performing relatively stronger than other global markets as a result of the continuing demand from a Chinese-induced commodity boom.

Home country equity bias

Australian investors’ strong bias towards local equities has been discussed in more depth in other Vanguard research4. These studies found that the size of the home country equity bias tends to depend on many factors, including familiarity with the home market, local taxation nuances (such as dividend imputation), currency volatility and transaction costs. Interestingly, the Australian home country bias

for local equity has been declining as shown in Figure 2. Allocations have fallen nearly 10% since 2001. As investors become more comfortable with investing offshore and recognise the full value of diversification, this increased inclusion of global equities in portfolios should continue.

Benefits of global equities

The Australian economy and listed equity market are dominated by a few sectors such as finance which, excluding REITs, represents 34% of the total market cap, and mining (the materials and energy sectors) which represents 28% of the total market cap. These sectors are heavily represented in the top ten securities which correspond to around 54% of the total market cap of the S&P/ASX 300 Index.5 While some of these stocks represent major companies with offshore

• Investorsshouldbasetheallocationtoglobalequitiesontheirrisk/returnprofile–atheoreticalapproach suggests that the asset allocation should be based on the market cap for global equities of 96.8% (as at 31 December 2012), while the minimum-variance analysis has shown that a weighting to global equities exceeding 50% has historically, not provided significant additional diversification benefits

• Theactualallocationtoglobalequitiesshouldbespecifictotheinvestor’sviewregardingtheshortand long term trade-offs and the practicalities of investing offshore.

3 FactSet, data dated February 20134 Steinfort, Rosemary and Alexis Gray, 2012, The role of Australian Equities and the

impact of the home country equity bias, The Vanguard Group

MSCI World ex. Australia & MSCI Australia as % of total market value of MSCI WorldFigure 1

Australia market cap, % of total MSCI World ex AU market cap, % of total

Source: FactSet data dated 31 January 2013

93

94

95

96

97

98

99

100

Dec 1991 Dec 1994 Dec 1997 Dec 2000 Dec 2003 Dec 2006 Dec 2009 Dec 2012

%

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operations, global equity markets provide an enhanced opportunity for greater exposure to a more diverse range of sectors and industries, compared with the exposure offered by Australian global companies. Increasing integration of financial markets has meant that, although global events have increased the synchronisation of markets (an example being the behaviour of markets post the 2008 financial crisis and more recently the ongoing euro zone crisis), investing in overseas markets can provide a hedge against country specific risk, thereby providing some protection against volatility as a result of individual countries being imperfectly correlated.

In Figure 3a the correlations of returns show that Australian equity market performance is less than perfectly correlated with other markets, so there are offshore diversification benefits. However, correlations have increased with MSCI World ex-Australia (unhedged in Australian dollars), since the 2008 financial crisis. Australian market volatility has been low relative to other markets (Figure 3b), but is similar to the MSCI World ex-Australia (unhedged in Australian dollars) which provides a diversified global exposure to developed equity markets.

How much should an investor allocate to global equities?

The key reasons for investing in global equities include the potential to diversify returns and/or the chance to reduce risk in portfolios.

Genuine diversification in global investing should be achieved across countries and sectors, as opposed to more limited approaches, which tend to focus more on country diversification. This is consistent with traditional investment theory supporting market cap weighting as an appropriate starting point for portfolios, along with asset allocation, given its ability to fairly and efficiently price all information over extended periods. For Australian investors such an approach would mean that at least 96.2% of their equity portfolio is allocated to global equity. The reality is very different with Australian investors generally preferring higher allocations to domestic equities. The average observed weight to Australian equities within a retail investors’ portfolio is about 73%. Investors have a preference to hold close to 70% more than the market cap weight of Australian equities within the context of MSCI World Index.

The strong propensity to invest in the domestic market may be justified by home country equity bias influences such as domestic familiarity, currency, risk, and transaction costs. Dividend imputation, which allows some investors to increase the income received from their investments by using the franking credits to reduce the income tax paid, is also a major factor that has supported the home country equity bias (more in-depth discussion in Vanguard research, Steinfort et al, 2012).

Evolution of home country bias in Australian equity markets 2001, 2005 and 2010Figure 2

82.6% 77.5% 73.9%

1.5% 2.2% 3.4%

81.1% 75.3% 70.4%

2001 2005 2010

Sources: Global Monetary Fund’s Coordinated Portfolio Investment Survey (2011), Barclays Capital, and Thomson Reuters Datastream.Note: Represents weights of allocation to Australian equities by domestic investors and the market cap weight of Australia in the MSCI AC World Index.

Domestic market as % of world market Over weighting to domesticDomestic Allocation

5 Factset data dated 31 December 2012

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The case for global equity investing can offset the home country equity bias due to factors that individual countries at any one point are likely to exhibit, including: different technological specialisations, fiscal and monetary policies and government regulations. The variation of these factors among different countries also supports their highly dynamic correlations.

Historical minimum-variance analysis

For Australian investors constructing portfolios, thinking of asset classes using market cap weighting as a starting point can result in a range of sensible equity combinations and together with minimum-variance analysis between global and Australian equities, investors can gain a sense of the possible volatility improvements, as illustrated in Figure 4.

The shape of the curve indicates that adding global equity to an Australia equity portfolio reduces portfolio volatility to a minimum volatility of 2% for a 100% equity portfolio with a weight of 50% in global equity and 50% in Australian equity. But as the following discussion explains, this method of finding the optimal allocation is very time dependent, so can vary from one period of time to the next.

Using this optimisation technique to establish the minimum-variance portfolios provides a reference point, rather than a set of rules. The analysis is backward looking and the result will be particularly dependent on the time period examined, with the “optimal” allocation to global equity likely to change. Over shorter time periods, global equity has had a similar volatility to Australian equity so there would

Correlations and volatilities of equity returns by countries and regions over a thirty year period ending 31 December 2012

Figure 3

Austria

Belgium

Canada

Denmark

Hong Kong

Italy

Japan

Netherlands

Norway

Spain Sweden

Switzerland

USA

United Kingdom

Emerging Markets

World ex AU

Average

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70%

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a. Correlations of returns in global equity markets with the Australian equity market

Australia

Austria

Belgium

Canada Denmark

Hong Kong Italy

Japan Netherlands

Norway Spain Sweden

Switzerland USA United

Kingdom

Emerging Markets

World ex AU

Average

0

5

10

15

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25%

Note: Country and regional returns represented by MSCI total return indices in Australian dollars and dates from 1982 through 31 December 2012. MSCI Emerging Markets dates from January 1988 to December 2012. For more information see rolling correlations and volatilities below

Sources: FactSet data as at 31 January 2013, Vanguard analysis

Ann

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devi

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b. Volatility of returns

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be less impact on volatility reduction. In addition, in a diversified portfolio including other asset classes may change the results. As can be seen in Figure 4, the inclusion of fixed income in the mix changes the volatility at each point.

Although this may provide a starting point for an investor, in the real world, investors are more likely to invest less in global equity and more in Australian equity for the previously mentioned reasons of familiarity, currency, risk, dividend imputation and transaction costs.

Addition of global equity has historically reduced portfolio volatility over a period of 23 yearsFigure 4

100% equity 70% equity/30% fixed income 50% equity/50% fixed income 30% equity/70% fixed income

Note: Australian equities are represented by S&P ASX 300 Index, global equities by MSCI World excluding Australia (unhedged in Australian dollars) and fixed income by Citigroup WGBI (hedged in Australian dollars)

Sources: S&P, MSCI and UBS. Data covers the period 1 January 1990 to 31 December 2012

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1%

1 21 41 61 81 101

Percentage of global equity allocation

Can multinational companies provide enough exposure?

There are some major multinational companies listed in Australia, such as BHP Billiton Ltd, Rio Tinto Ltd. and the four major banks, with global operations that contribute to a significant part of their revenue – and investors may view them as providing enough global exposure. For example National Australia Bank Ltd, a major financial services company, provides a comprehensive range of banking and financial services in Australia, New Zealand, the United Kingdom and Asia. While another major Australian listed company (which also has a dual listing in the UK), Rio Tinto Ltd., explores and mines for mineral resources and engages in the production of copper, gold, iron ore, coal, aluminium, borates, titanium dioxide and other minerals and metals. Rio Tinto Ltd’s Australian operations are headquartered in Melbourne but the Australian listed company has operations on six continents that contribute to revenue. So a domestic investor may be satisfied that the diversification benefits of global investing are already reflected in the prices and performance of these large Australian companies.

Globalised domestic companies are becoming an increasing percentage of local markets but we believe it still makes sense for investors to hold foreign-domiciled investments for the following reasons.

• Companies’historicalperformancehasbeenmorehighlycorrelatedwiththeirdomesticmarketsthanforeign markets, regardless of where business is conducted (Rowland and Tesar, 2000; McEnally and Cristophe, 2000).

• Sectordiversification:AportfoliomadeupsolelyofAustraliacompanieswouldbemoreconcentratedin mining and finance due to the top heavy structure of the Australian equity market. An Australian portfolio would lose not just investment opportunities, but also the diversification benefits of a portfolio, that is more evenly distributed across industries.

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Practical considerations for Australian investors

Dynamic impact of global diversificationIn Figure 4 we look at the impact of diversification over a more than twenty-year period but most investors are unlikely to retain the same portfolio for such a period of time. But it is also necessary to evaluate the impact of combining Australian and global equities over shorter time periods. Figure 5 shows the maximum possible diversification benefit achieved at various allocations to global equities over rolling ten-year windows. For example, over the ten years ended December 2001, a 10% allocation to global equities would have provided a 5.2% reduction in the volatility while a 50% allocation to global equities would have provided a 16.3% reduction in volatility – which is the maximum diversification benefit possible during that period.

Since correlations and volatilities are dynamic, it is necessary to use them as an indicative rather than as an absolute reference. For the last ten years ending December 2012, the maximum reduction in volatility of 10.5% was provided by an approximate 40% weighting to global equities while a 10% weighting to global only reduced volatility by 4.1%. During some of the other intervening ten year periods in Figure 5, a 60% allocation to global equities provided the maximum diversification benefit, meaning those investors who held allocations greater than 60% would have found the volatility was higher for their portfolios.

Benefits of falling correlations and volatilityRecent falling correlations have increased the diversification benefits of investing in global equities in the short term, although over the longer term correlations have remained relatively stable (comparable to the static correlations in Figure 3a). Lower average correlations across global equity markets in Figure 6a show that the correlation between Australian and global equities have been falling since late 2010. The financial crisis in 2008 which affected the performance of securities similarly is evident in the higher correlations between global and Australian equities during the period from 2008-10.

Although individual markets across the world became more synchronised in the aftermath of 2008, short-term correlations have returned to similar levels seen in late 1990. Figure 6b shows average correlations across individual countries at approximately 0.38 in the 1990s moving to 0.43 as of 2012. Whether correlations remain at these levels is open for debate; however, it is not unreasonable to anticipate that the future correlation between global and Australian equities could remain at current levels compared with higher historical levels, particularly given that correlation trends can be slow to shift.6

Diversification benefits also increased due to the decreased relative volatility for global equities following 2008. At the same time Australian

Average maximum volatility reduction achieved by including global equityFigure 5

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40

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60

70

80

90

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FactSet data dated as at 31 December 2012, Vanguard calculation

100% global 60% global 50% global 40% global

30% global 20% global 10% global

6 Global equity correlations should remain less than perfect. Several studies (e.g., Stock and Watson, 2003) have found minimal evidence of increased global synchronisation of business cycles, despite increases in global trade flows, developed-market integration, and the introduction of the euro.

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equities exhibited relatively lower volatility compared to the period prior to 2008. Figure 7 shows the trailing 12-month standard deviation of returns for both Australian and global equities. The lower volatility, combined with falling correlations (see Figure 6), can enhance the impact of a globally diversified portfolio. There have been prior periods in which global equities experienced significantly higher volatility than Australian equities for a couple of years, as was seen in 1990-92 and 2003-05. However, during those periods correlations across global markets were significantly lower than they have been recently. The volatility of Australian and global equities has been directionally similar over time but global equities have on average experienced lower relative spikes in volatility since 2005. The diversification benefits of global equities are likely to continue subject to the persistence of lower relative volatility – although as can be seen

that over longer periods of time the relative volatility can be variable.

Diversification of return opportunitiesAlthough lower average portfolio volatility would be expected over the long term, an immediate benefit of global diversification is the opportunity to participate in regional markets which are performing differently. For example, while the Australian market may lead over some periods, another country or market will invariably lead at other points. Figure 8 demonstrates the near-term benefits of global diversification. By including broadly diversified global equities alongside Australian equities in a portfolio, the investor’s return should fall between those of the Australian and the global market. For example, from the mid-1990s to 2000, exposure to diversified global equities would have allowed an investor to participate in the outperformance of those markets.

Falling correlations mean more impact through diversificationFigure 6

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Rolling 12 month correlation

Rolling 10 year correlation

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Dec 90 Dec 92 Dec 94 Dec 96 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12

Dec 90 Dec 92 Dec 94 Dec 96 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12

Rolling 10 year correlation

Rolling 12 month correlation

a. Correlations between Australian equities and global equities

Notes: Country returns represented by MSCI country indices. Data through 31 December 2012.

Sources: FactSet data dated January 2013

b. Correlations across all countries

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On the other hand, although exposure to diversified global equities would have pushed the returns for a global investor below that of the Australian equity investor from 2000 until 2008, the investor would have again benefited from 2010 until late 2012 when global equities have outperformed. It is important to recall that during the 2000s, both correlations and volatility had periods of rising and falling, supporting and negating the primary benefit of diversification (as noted in Figures 6–8). The fact that a globally diversified investor continued to see benefits from diversification in the form of greater returns should not be overlooked. We cannot speculate on the future path of returns, but we can assume that returns for Australia and global equities will continue to differ, leading to a continued benefit from diversification across both.

Impact of currency exposureInvesting in global equities creates exposure to underlying currencies which, in turn, can cause fluctuations in performance. Currency returns can be susceptible to time-period-dependent effects. For example, certain long-term periods can reveal performance differentials, but over shorter time frames currency can introduce extreme volatility to return streams. Figure 9 shows fluctuations between hedged and unhedged returns as measured by the MSCI World ex Australia Index can vary widely on a monthly basis. Over longer time periods however, currency should have a minimal impact with respect to a portfolio of global assets.

While currency movements tend to be unpredictable, the relationship between unhedged returns and hedged returns is more significant for an Australian investor, as demonstrated in Figure 10. Research by

Lower relative volatility means greater impact from global diversificationFigure 7

0

5

10

15

20

25

30%

Dec 90 Dec 92 Dec 94 Dec 96 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12

Australian equities Global equities ex. Australia

Notes: Australian equities represented by MSCI Australia Index; Global equities represented by MSCI World Index ex-Australia. Data through 31 December, 2012.

Sources: FactSet data dated January 2013

Rolling 12-month standard deviation of returns

Costs of global equity investment

Investing offshore can incur additional costs compared with investing in domestic equities. The average annual management cost attributed to an investment in a retail global equity (index) fund is 1.7%, which is higher than the 1.5% for a retail Australian equity (index) fund – this compares to the higher average costs for retail active funds, 1.9% and 1.8% respectively for global and domestic equity funds (management cost data is from Morningstar Direct data as at 31 October 2012). The higher management costs for global equity funds are inclusive of the higher expenses associated with investing offshore – costs of implementation (broker’s commission), currency management and other costs related to global investing. There may also be costs associated with the impact of foreign taxes and cost reflected in the bid-ask spread when an investor transacts, with the spread being wider for a global equity fund relative to that of an Australian equity fund.

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the Vanguard Group (LaBarge, 2010. “Currency Management: Considerations for the Equity Hedging Decision”) has shown that the relative return or hedge impact is positive over the short and long term, and suggests that hedging back to the Australian dollar produces a higher return although accompanied by higher volatility – but the costs of

hedging can negate the higher return and from a risk-adjusted return viewpoint, due to the high volatility, any significant value added may be reduced.

Deciding whether to hedge currencies or not requires careful consideration of a number of issues which can vary from investor to investor.

Changing correlations and volatility have not mitigated return differentials Figure 8

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50%

Global equities outperform

Global equities underperform

Dec 90 Dec 92 Dec 94 Dec 96 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12

Trailing 12 month return differential between global and Australian equities

Note: Australian equities represented by MSCI Australia Index and global equities represented by MSCI World ex Australia Index. Data through 31 December 2011.

Sources: FactSet data dated January 2013

Tax consequences of currency hedging

From a tax perspective for an Australian investor, gains and losses associated with currency hedging are considered income and are therefore offset against interest and dividends which are the other primary forms of income. Foreign exchange realised losses will dilute the ongoing income revenue that continues to be generated by the underlying investments, while realised gains will increase the income.

Monthly performance in Australian dollars of hedged versus unhedged returns.Figure 9

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-5

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5

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15%

Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12

MSCI World ex. Australia total return index (Hedged, AUD) MSCI World ex. Australia total return index (Unhedged, AUD)

Source: FactSet data through 31 December 2012. dated 8 January 2013

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Key issues include:

• Thetimehorizonforthegivenportfolio(overextended time frames, currencies movement tends to have limited impact on returns, though this can be time window dependent)

• Theassetallocationdecision,andthesizeoftheexposure to global assets (higher levels may increase the need for hedging)

• Theinvestor’slevelofrisktolerance(howmuchrisk a portfolio can sustain over time) and risk aversion (to what extent an investor is prepared to take on losses)

• Asenseofthelevelofcorrelationbetweencurrency returns and the underlying equity returns

Conclusion

The decision to invest globally is only the first step. The next step is to determine an appropriate allocation. The standard financial theory approach, whether for allocating globally or within a specific country or market, is to invest proportionally according to market cap. This method assumes that markets are reasonably efficient and that stock prices reflect all the available information, investment

positions, and expectations of the investing community. Australian equities currently (as at 31 December 2012) are approximately 3.8% of the globally market cap, so according to this theory, Australian investors would have 96.2% of their equity portfolio in global equities with any changes in weight, fluctuating with market performance.

However qualitative considerations are often part of the decision making process when deciding an allocation to global equities. Our minimum-variance analysis demonstrated that an allocation of between 40-50% to global equities is optimal depending on the time frame. But domestic Australian investors, like their global counterparts, are influenced by embedded home country equity biases – resulting from factors such as behavioural tendencies as well as the real financial benefits of dividend imputation.

Based on quantitative analysis and qualitative considerations, we believe a domestic investors should consider allocating part of their portfolios to global securities, which could be within the range of 50%, as suggested by the minimum-variance analysis, to 96.2%, the global market cap weight. Allocations closer to the market cap weight may be suitable for those investors seeking to be closer to a

Relationship between hedge impact and market returnsFigure 10

y = 0.875x + 0.0046R² = 0.4512

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10%

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Market returns (Unhedged, AUD)

Market returns (Hedged, AUD)

Hedge impact is positive

Source: FactSet data through 31 December 2012, Vanguard Group calculations

Currency considerations

Labarge (2010) summarised the key issues as they relate to managing currency exposure. As an Australian investor where the equities market represents such a small subset of the investable market universe, managing currency exposure is inclusive of the decision to invest globally. By investing offshore, an investor creates exposure to overseas currencies: this decision alone triggers a set of questions to help guide one’s approach to managing currencies.

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market-proportional weighting or for those who are hoping to obtain potentially greater diversification benefits and are less concerned with the potential risks and higher costs. On the other hand, allocations closer to 50% may be viewed as offering a greater balance among the benefits of diversification, the risks of currency volatility, investor preferences, and costs.

References:

Chan, Kolak, Vicentiu Covrig, and Lilian Ng, 2005. What Determines the Domestic Bias and Foreign Bias? Evidence From Mutual Fund Equity Allocations Worldwide. Journal of Finance 6: 1495–1534.

Davis, Joseph H., and Roger Aliaga-Díaz, 2009. The Global Recession and International Investing. Valley Forge, Pa.: The Vanguard Group.

Investment Company Institute, 2011. 2011 Investment Company Fact Book, 51st ed. Washington, D.C.: Investment Company Institute.

LaBarge, Karin Peterson, 2010. Currency Management: Considerations for the Equity Hedging Decision. Valley Forge, Pa.: The Vanguard Group.

McEnally, Richard W., and Stephen E. Christophe, 2000. U.S. Multinationals as Vehicles for International Diversification. Journal of Investing 9(4): 67–75.

McIntosh, Roger and Rosemary Steinfort, 2011, Understanding Vanguard’ Diversified Funds, The Vanguard Group

Christopher Philips et al, June 2012, The role of home bias in global asset allocation decisions, The Vanguard Group

Philips, Christopher B., Brad Redding, 2013, Exploring the next frontier: A reviw of frontier equity markets, The Vanguard Group:

Rowland, Patrick F.,and Linda L. Tesar, 2000. Multinationals and the Gains from International Diversification. NBER Working Paper No. 6733. Cambridge, Mass.: National Bureau of Economic Research.

Steinfort, Rosemary and Alexis Gray, December 2012, The role of Australian equities and the impact of the home country equity bias, The Vanguard Group

Stock, James H., and Mark W. Watson, 2003. Understanding Changes in International Business Cycle Dynamics. NBER Working Paper No. 9859 Cambridge, Mass.: National Bureau of Economic Research.

Stock Markets. Journal of Wealth Management 6(2): 68–80.)

Tokat, Yesim, 2006b. International Equity Investing: Long-Term Expectations and Short-Term Departures. Valley Forge, Pa.: The Vanguard Group. (Originally published as Yesim Tokat and Nelson

W. Wicas, 2005. Short-Run Considerations for the Long-Term International Investor. Journal of Investing 14(1): 32–40

Frontier markets

Developed and emerging markets have been traditionally considered the viable investable universe for investors when thinking about investing in offshore equities. While developed economies secured a solid position during the twentieth century, emerging economies have gained prominence for their rapid industrialisation, gentrification and urbanisation of their populations. In recent years, the notion of “frontier markets” has gained attention: These markets tend to be characterised by significant risks, such as political, economic, regulatory and event. In essence, these are embryonic on many levels, and are susceptible to significant volatility and event risks. A good starting point for investors when constructing portfolios remains market-cap weighting, since this represents the true investable universe available. On this dimension,” frontier markets” have not yet gained sufficient market mass nor market stability and trading conventions to warrant a material allocation. But markets such as Argentina, considered by index providers as a “frontier market”, have also been described as an economy moving to a “highest state of development” (as classified by the World Economic Forum) although the World Bank places it in the bottom 12% for financial market development.

For further reading see the Vanguard research paper by Philips et al, Exploring the next frontier: A review of frontier equity markets, January 2013.

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This paper includes general information and is intended to assist you. Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken your circumstances into account when preparing the information so it may not be applicable to your circumstances. You should consider your circumstances and our Product Disclosure Statements (“PDSs”) before making any investment decision. You can access our PDSs at vanguard.com.au or by calling 1300 655 101. Past performance is not an indication of future performance. This publication was prepared in good faith and we accept no liability for any errors or omissions.

© 2013 Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263). All rights reserved.

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