Vanguard, one of the world’s largest asset managers, may be on the verge of retiring its foray into the Chinese financial market. The former US-based fund reportedly contacted the China Securities Regulatory Commission and the Shanghai government, to discuss its potential withdrawal from a joint venture with the digital finance giant Ant. After holding more than 1 million customers at the peak of its success, Vanguard may become the latest major investor to abandon the promising yet uncertain Chinese market.
Vanguard first entered China two years ago, teaming up with Ant Group to launch a mutual fund company. The venture, which was the first of its kind to receive a robo-advisory licence from the China Securities Regulatory Commission, provided investors with a low-cost and passive way to gain access to the markets. Customers only needed to invest Rmb800 ($116) in order to open an account and those figures were lowered even further in 2021, shortly after they abandoned plans to launch their own separate mutual fund company.
Despite their waiving of the entry threshold and Vanguard’s brand recognition in the US as a cost-effective provider of index funds, the venture never quite caught on with investors due in part to a limited selection of underlying securities and a lack of access to offshore markets. It also failed to take into account the mindset of Chinese retail investors who, opposed to passive exposure models such as Vanguard’s, are more likely to prefer taking high-risk speculation borne out of an anticipation for high returns.
Furthermore, the venture has in more recent times been hit by Chinese regulatory pressure on tech companies that left Ant Group unable to adequately promote their products. To further complicate matters, a person familiar with the JV’s operations revealed that working with the American fund manager was incredibly expensive, with the chief investment officer costing over $1 million a year alone.
As Vanguard reviews its plans for the Chinese market, unsure of whether or not to make a complete withdrawal from it, their struggles serve as a reminder of the arduous task big US firms face in their pursuit of a slice of the massive Chinese investment market. Many have since tried to capitalize on the country’s newfound openness to foreign companies, only to be held back by commercial obstacles or the conflicting expectations of domestic investors.
Vanguard, the second largest asset manager in the world, is a global investment management company based in Pennsylvania, USA. Founded in 1975, the group provides both individual and institutional investors with access to a range of low-cost, high-quality investment products. Its founder and current executive chairman, John Bogle, created the concept of passively-managed index funds, which has since become a staple of the global investment market.
Tim Buckley is the current chief executive of Vanguard and a member of the company’s Global Executive Team. Since taking on the role in 2018, the experienced money manager has focused on efforts to grow Vanguard’s global footprint by prioritizing digital advancements and expanding the company’s presence in emerging markets, such as China. Under his leadership, the group has also broadened their product offering to include both actively and passively managed funds, as well as private wealth management services.
