The joint-venture, in which Vanguard has a 49% stake, will provide “a customised service for investors based on their risk preference and investment objective, and after receiving investors’ full authorisation, the advisory service will help investors buy/sell mutual funds and adjust their positions to achieve their investment goals”, a Vanguard spokeswoman told FSA.
The entity, called Xianfeng Linghang Tougu (Shanghai) Investment Consultancy Company Ltd, has been approved by the China Securities Regulatory Commission to offer an investment advisory service to China’s retail market, with a minimum investment of RMB 800 ($113), according to a press statement.
The announcement comes six months after the joint-venture appeared in an online national registry.
The Pennsylvania-based firm, which has $5.9trn in assets under management, is a specialist provider of index-linked products, including passive mutual funds and ETFs, although up to a third of its AUM are now active funds.
It launched a wholly foreign-owned enterprise (WFOE) in China in May 2017, but it has not yet launched an onshore fund.
“Since opening our Shanghai office in 2017, we have been dedicated to bringing Vanguard’s way of investing to Chinese investors,” said Vanguard CEO Tim Buckley in the statement.
“This venture marries Vanguard’s…investment philosophy and approach with Ant’s digital platform and technology,” he added.
It could potentially boost Vanguard’s direct access to onshore investment flows.
For instance, Atlanta-based Invesco saw assets managed by its local joint-venture, Invesco Great Wall, quadruple to $31.5bn this year after one its funds was added to Ant’s platform in 2018.
However, it is unclear whether the joint-venture will be a conduit for the distribution of Vanguard funds.
“Ant Financial will provide the technology platform and operate the fund dealing system. Vanguard, as investment manager, will provide investment-related services including investment strategy advice, asset allocation and product selection,” said the spokeswoman.
“There are currently 5,700 mutual funds from different providers available on the [Ant] platform (out of 5,971 in the market), including equity, fixed income and money market funds,” she added.
Hangzhou-based Ant Financial, a third-party payment provider, held RMB 1.13trn in net assets as of the end of 2018, according to the statement.
It is the operator of Alipay, an online payment service launched in 2004, which now has 1.2 billion users around the world. An affiliate of e-commerce giant Alibaba Group, it also runs Yu’ebao – the world’s largest money market fund – within the Alipay app.
“Alipay is committed to making finance more inclusive for individuals and small and micro businesses through technology, and we’re partnering with financial institutions around the world to achieve this by building an open and technology-driven ecosystem,” said Eric Jing, chairman and CEO of Ant Financial in the statement.
The Asset Management Association of China estimates the size of the country’s retail investor market at RMB 13.9trn.
“Today millions of Chinese investors lack access to professional investment advisory services. Through this partnership, we will reduce complexity and significantly lower the threshold for individual investors to access high-quality wealth management advice in China,” added Peter Zhang, CEO of the joint venture.
The joint-venture is the latest move by Vanguard to increase its presence in China, where it has lagged other firms, such as Blackrock iShares, a rival provider of passive products including ETFs.
In a newly-created role, Yan Pu, was recently appointed head of Vanguard Group’s investment management group in China.
She is “responsible for building and leading Vanguard’s China-based investment team in providing investment solutions for clients in China”, according to a November press release.
