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November 30, 2021

Vanguard to launch new actively managed fund focused on Chinese equities

By Verdict Staff

Vanguard has filed an initial registration statement with the US Securities and Exchange Commission (SEC) to roll out Vanguard China Select Stock Fund.

The fund, which is expected to launch in the first quarter of 2022, will invest in both onshore and offshore Chinese equities.

It is targeted at clients looking for ‘actively managed, high-alpha-target equity exposure to complement a broadly diversified portfolion’, according to Vanguard

Vanguard head of portfolio review department Kaitlyn Caughlin said: “Vanguard has continued to enhance its active equity lineup by partnering with top-tier external investment advisors who provide access to sound investment strategies and expert portfolio manager talent.

“Vanguard research indicates that there is an opportunity for talented active managers to generate alpha in China’s large, but inefficient, equity market.”

Vanguard China Select Stock Fund will be co-managed by the company’s fund advisers Wellington Management Company and Baillie Gifford Overseas. Both these firms are said to have portfolio management experience and expertise in China as well as in Chinese equity markets.

The fund will seek to outperform the MSCI China All Shares Index and offer alpha potential and diversification benefits.

Furthermore, its single-country focus is expected to expose investors to ‘more acute investment, geopolitical, and regulatory risks’.

Vanguard considers exposure to China a vital part of both the equity and fixed income allocations of a globally diversified portfolio.

The country is said to make up for a significant and expanding portion of the global equity market with the second largest GDP output globally. It is also the third largest country in terms of market capitalisation.

Earlier this year, Vanguard backed out from its plan to secure a mutual funds licence in China, citing a ‘crowded’ market as the reason for its disinterest.

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