Vanguard Group

Enhanced due diligence for the quarter ended 30 June 2022

Enhanced due diligence trigger

An enhanced due diligence (EDD) on a fund may be required for any number of reasons. Please refer to the CIC Policy and Procedures Manual for more detail.

In the second quarter of 2022, the below Vanguard fund (the fund) was flagged for enhanced due diligence (EDD)

▪ Vanguard Ethically Conscious International Shares Index Fund

Nature of the EDD flag

The EDD flag was due to receiving notification of a change to the funds’ key personnel. Vanguard notified us via their quarterly checklist that they had experienced a change in key fund management personnel James Chatfield has been promoted to Senior Portfolio Manager, Ian Campbell has been promoted to Portfolio Manager, and Victoria Chai has been promoted to Equity Trader/Index Analytics. All three personnel work within the Australian Equity Index Investment Group.

Review

Vanguard provided the CIC with an organisational chart outlining the senior management within the equity team and gave a detailed summary of the three individuals presented below Victoria Chai is an Equity Trader/Index Analyst within Vanguard’s Australian Equity Index Investment Group. In this role, Victoria is responsible for the daily management of equity trades, monitoring index changes and corporate actions. Prior to this Victoria Chai was an Investment Data Analyst within the Global Data Management (GDM) team for Vanguard Asia Pacific. In this role, Victoria was responsible for the delivery and maintenance of start of day and proforma benchmarks, security set-up, risk models, portfolio positions, corporate actions treatment and ETF baskets Prior to joining Vanguard in 2016, Victoria worked in performance and risk analytics in the Asset Servicing department of National Australia Bank (NAB), as well as in Quality Assurance at MLC/NAB Wealth. Victoria holds a Bachelor of Commerce (Accounting and Finance) from the University of Melbourne and has completed all three levels of the CFA program.

James Chatfield is a Senior Portfolio Manager and Team Leader within Vanguard’s Australian Equity Index Investment Group. In this role, James is responsible for the daily management of equity trades, monitoring index changes, corporate actions and market micro-structure for the Asia-Pacific region on behalf of Vanguard’s global funds. Prior to joining Vanguard Australia in March 2016 as an Assistant Portfolio Manager and Senior Equity Trader, James gained more than 20 years’ experience in the finance industry, serving for four years as

Director and Head of APAC sales for Liquidnet, and more than 15 years at Lazard Asset Management in a number of roles including trading institutional equities across all APAC markets. James holds a Bachelor of Science in Economics from Loughborough University.

Ian Campbell is a Portfolio Manager within Vanguard’s Australian Equity Index Investment Group. In this role, Ian is responsible for the daily management of equity & derivative trades, monitoring index changes, corporate actions, and market microstructure the Asia-Pacific region on behalf of Vanguard’s global funds. Prior to his current role, Ian spent several years as an Equity Trader within the same team, and prior to that Ian was as a Senior Data analyst in Vanguards Global Data Management team, spending the majority of 2013 on secondment to the US head office in Malvern, as part of a global data management project. Ian holds a BA in Economics from University College Dublin and a MAppFin from Macquarie University.

Vanguard has substantial depth within their organisation with many in their team being CFA members, combined with years of experience within Vanguard across both fixed income and equity groups.

Vanguard confirmed the personnel changes do not impact the day-to-day management of the fund and noted that they take a team-based approach to investment management, avoiding a star manager system. Each portfolio manager is cross-trained and can carry out investment management responsibilities across all relevant portfolios. Their approach ensures fund management continuity and consistency over the long term.

Conclusion

Although a change in personnel can create many challenges within a business, we are satisfied that the ongoing management and support of the fund will not be materially affected by this change, due to:

1. The fact that the funds mandate is stable, well established and unchanged

2. The investment mandate follows an index replication investment process which significantly minimises the degree of discretion any individual portfolio manager can have in the funds’ allocation

3. At any point in time, the Head of Equity indexing is well supported by a large team of portfolio managers with many years’ experience within Vanguard

Given all the above, the CIC assesses that the fund has passed this enhanced due diligence flag in relation to a change in the key personnel

August 2022

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