Vanguard’s new China head to build team onshore

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A senior China appointment signals that the firm may be coming off the sidelines to follow competitors, who have already launched multiple funds onshore.

Vanguard has appointed Yan Pu to fill the newly-created role of managing director and head of investment management group for China. She will be based in Shanghai, according to a firm spokeswoman.

She is responsible for building and leading the China-based investment team, according to a statement from the firm.

Axel Lomholt, who will be managing director and head of portfolio review for Asia, is Pu’s replacement.

Both roles are effective immediately.

Pu joined Vanguard in 2004. Prior to her new role, she was head of portfolio review for Asia, based in Hong Kong, where she oversaw product management and development as well as capital markets.

China strategy?

In the statement, Pu said: “With China being one of the key international markets for Vanguard, I am honored to lead the firm’s investment management team in China with the aim of continuing to grow the business and serve our clients in the market.”

However, Vanguard is doing very little in China compared to its competitors who have been making ambitious moves onshore. Vanguard received an investment management wholly foreign-owned enterprise (IM WFOE) licence in November 2016 and opened its Shanghai office in May 2017.

Since then, the world’s second largest asset manager has not done much onshore. According to Asset Management Association of China (Amac), the firm doesn’t have private fund management (PFM) or qualified domestic limited partnership (QDLP) license.

A PFM licence allows foreign managers to offer onshore funds to China’s qualified investors while a QDLP licence allows foreign managers to raise money domestically to invest in offshore traditional and alternative investments, including overseas equity and bond funds, hedge funds and real estate, within allocated quotas.

As of 9 August this year, 21 foreign firms including Vanguard’s chief rival Blackrock, hold a PFM licence and collectively they have launched 46 products with RMB 5.4bn ($774m) in assets, according to a statement from the Amac.

In August, Blackrock registered its third PFM product, the Blackrock’s China A-share Opportunity Private Fund II.

Earlier this year, Vanguard’s Asia CEO Charles Lin told FSA that “plans for a PFM licence are still ‘on our radar’. I wouldn’t say we are in a waiting mode. We have actively started to evaluate the market, but we don’t have a conclusion yet.

“After nearly two years of operations, the headcount for the firm’s China business, which also includes an office in Beijing, has grown to 20 from just five in mid-2017, ” Lin said. But he added that onshore capabilities were only supporting functions such as market research, finance and human resource staff.

A Vanguard spokeswoman declined to comment on the firm’s China strategy, but she did tell FSA that Pu “will be setting up the investment team for the mainland China market soon” and by the end of 2019 the China headcount will be 30.

China opening

This appointment of Pu, who is tasked with building a China-based investment team, comes against the backdrop of China’s rapid liberalisation of its financial industry.

The changes are coming at a fast pace. China’s State Council yesterday announced that restrictions on the business scope of financial institutions, such as foreign banks, securities companies and fund houses, have been removed.

Last month, Premier Li Keqiang signed a State Council Order, announcing that foreign banks can set up wholly foreign-funded banks and branches at the same time. 

In the same month, China officially set a specific timetable for the abolishment of investment limitations for foreign fund management firms that own a joint venture stake in Chinese retail mutual fund companies. The restriction will be officially lifted on 1 April 2020.

In September, China officially abolished the quota restrictions of qualified foreign institutional investor (QFII) and its renminbi equivalent (RQFII) programmes, FSA previously reported.

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